These Analysts Just Made A Sizeable Downgrade To Their Athenex, Inc. (NASDAQ:ATNX) EPS Forecasts

One thing we could say about the analysts on Athenex, Inc. (NASDAQ:ATNX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the nine analysts covering Athenex provided consensus estimates of US$115m revenue in 2021, which would reflect a stressful 20% decline on its sales over the past 12 months. Losses are presumed to reduce, shrinking 15% from last year to US$1.47. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$178m and losses of US$1.18 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Athenex

The consensus price target fell 64% to US$10.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Athenex analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$5.00. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Athenex's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 20% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 41% 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. It's pretty clear that Athenex's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Athenex analysts - going out to 2025, 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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