Need To Know: The Consensus Just Cut Its Avadel Pharmaceuticals plc (NASDAQ:AVDL) Estimates For 2021

Today is shaping up negative for Avadel Pharmaceuticals plc (NASDAQ:AVDL) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Surprisingly the share price has been buoyant, rising 19% to US$9.20 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the consensus from eight analysts covering Avadel Pharmaceuticals is for revenues of US$2.0m in 2021, implying a sizeable 91% decline in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$1.32 per share in 2021. Yet before this consensus update, the analysts had been forecasting revenues of US$3.4m and losses of US$1.32 per share in 2021. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.

See our latest analysis for Avadel Pharmaceuticals

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. Over the past five years, revenues have declined around 28% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 91% decline in revenue until the end of 2021. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.7% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Avadel Pharmaceuticals to suffer worse than the wider industry.

The Bottom Line

Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Avadel Pharmaceuticals going forwards.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Avadel Pharmaceuticals, including major dilution from new stock issuance in the past year. Learn more, and discover the 1 other risk we've identified, for 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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