US$5.26 - That's What Analysts Think Alector, Inc. (NASDAQ:ALEC) Is Worth After These Results

Last week, you might have seen that Alector, Inc. (NASDAQ:ALEC) released its quarterly result to the market. The early response was not positive, with shares down 10.0% to US$1.17 in the past week. It wasn't the greatest result, with ongoing losses and revenues of US$3.7m falling short of analyst predictions. The losses were a relative bright spot though, with a statutory per-share loss of US$0.41 being 17% smaller than the analysts 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

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Taking into account the latest results, the current consensus, from the seven analysts covering Alector, is for revenues of US$14.6m in 2025. This implies a concerning 83% reduction in Alector's revenue over the past 12 months. Losses are forecast to balloon 59% to US$1.96 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$14.1m and losses of US$2.05 per share in 2025. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrades to both revenue and loss per share forecasts for this year.

See our latest analysis for Alector

The consensus price target rose 25% to US$5.26, with the analysts encouraged by the higher revenue and lower forecast losses for next year. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Alector, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$1.50 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that revenue is expected to reverse, with a forecast 91% annualised decline to the end of 2025. That is a notable change from historical growth of 8.6% 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 18% 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 obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also upgraded their revenue estimates, although our data indicates it is expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that 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 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 3 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.