Some Analysts Just Cut Their Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) Estimates

The latest analyst coverage could presage a bad day for Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After this downgrade, Apellis Pharmaceuticals' 17 analysts are now forecasting revenues of US$228m in 2023. This would be a huge 101% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 12% from last year to US$5.04. However, before this estimates update, the consensus had been expecting revenues of US$254m and US$4.85 per share in losses. 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 Apellis Pharmaceuticals

The consensus price target was broadly unchanged at US$77.47, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 Apellis Pharmaceuticals, with the most bullish analyst valuing it at US$123 and the most bearish at US$40.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Apellis Pharmaceuticals' growth to accelerate, with the forecast 75% annualised growth to the end of 2023 ranking favourably alongside historical growth of 61% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Apellis Pharmaceuticals to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Apellis Pharmaceuticals after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Apellis Pharmaceuticals analysts - going out to 2024, 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 that insiders are buying.

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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.