Need To Know: Analysts Just Made A Substantial Cut To Their Alector, Inc. (NASDAQ:ALEC) Estimates

The analysts covering Alector, Inc. (NASDAQ:ALEC) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the ten analysts covering Alector are now predicting revenues of US$94m in 2025. If met, this would reflect a huge 53% improvement in sales compared to the last 12 months. Losses are forecast to hold steady at around US$1.60 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$128m and losses of US$1.34 per share in 2025. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Alector

The consensus price target fell 34% to US$10.28, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Alector's rate of growth is expected to accelerate meaningfully, with the forecast 41% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 18% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 22% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Alector is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Alector.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Alector going out to 2026, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks with high insider ownership.

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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.