Earnings Update: Alector, Inc. (NASDAQ:ALEC) Just Reported And Analysts Are Trimming Their Forecasts

Alector, Inc. (NASDAQ:ALEC) just released its full-year report and things are looking bullish. The results were impressive, with revenues of US$101m exceeding analyst forecasts by 53%, and statutory losses of US$1.23 were likewise much smaller than the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Alector

Following the recent earnings report, the consensus from eight analysts covering Alector is for revenues of US$28.7m in 2025. This implies a concerning 71% decline in revenue compared to the last 12 months. Per-share losses are expected to explode, reaching US$2.13 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$42.4m and losses of US$1.86 per share in 2025. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.

The average price target was broadly unchanged at US$4.44, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Alector, with the most bullish analyst valuing it at US$8.56 and the most bearish at US$1.00 per share. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 71% by the end of 2025. This indicates a significant reduction from annual growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 20% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Alector is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$4.44, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Alector going out to 2027, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Alector , and understanding them should be part of your investment process.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.