Earnings Release: Here's Why Analysts Cut Their Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) Price Target To US$41.57

A week ago, Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. Revenues were better than expected, with US$5.2m in revenue some 12% ahead of forecasts. The company still lost US$1.16 per share, although the losses were marginally smaller than the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Arcutis Biotherapeutics after the latest results.

Check out our latest analysis for Arcutis Biotherapeutics

Following the latest results, Arcutis Biotherapeutics' seven analysts are now forecasting revenues of US$28.0m in 2023. This would be a major 149% improvement in revenue compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$4.89. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$29.1m and losses of US$4.95 per share in 2023.

The average price target fell 5.8% to US$41.57, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. 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 Arcutis Biotherapeutics, with the most bullish analyst valuing it at US$57.00 and the most bearish at US$22.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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 Arcutis Biotherapeutics' growth to accelerate, with the forecast 5x annualised growth to the end of 2023 ranking favourably alongside historical growth of 151% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Arcutis Biotherapeutics is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. They also downgraded Arcutis Biotherapeutics' revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Arcutis Biotherapeutics. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Arcutis Biotherapeutics analysts - going out to 2025, and you can see them free on our platform here.

Even so, be aware that Arcutis Biotherapeutics is showing 4 warning signs in our investment analysis , you should know about...

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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.