Analysts Just Shaved Their Atea Pharmaceuticals, Inc. (NASDAQ:AVIR) Forecasts Dramatically

Today is shaping up negative for Atea Pharmaceuticals, Inc. (NASDAQ:AVIR) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, the four analysts covering Atea Pharmaceuticals provided consensus estimates of US$192m revenue in 2022, which would reflect a noticeable 7.7% decline on its sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of US$2.11 in 2022, a sharp decline from a profit over the last year. Yet before this consensus update, the analysts had been forecasting revenues of US$218m and losses of US$1.74 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Atea Pharmaceuticals

The consensus price target fell 8.8% to US$15.50, implicitly signalling that lower earnings per share are a leading indicator for Atea Pharmaceuticals' valuation. 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. Currently, the most bullish analyst values Atea Pharmaceuticals at US$27.00 per share, while the most bearish prices it at US$10.00. 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.

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 sales are expected to reverse, with a forecast 6.2% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 130% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.5% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Atea Pharmaceuticals is expected to lag 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, and industry data suggests that Atea Pharmaceuticals' revenues are expected to grow 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Atea Pharmaceuticals 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.