Earnings Update: Axsome Therapeutics, Inc. (NASDAQ:AXSM) Just Reported Its Yearly Results And Analysts Are Updating Their Forecasts

It's been a good week for Axsome Therapeutics, Inc. (NASDAQ:AXSM) shareholders, because the company has just released its latest annual results, and the shares gained 7.0% to US$65.32. Revenues were a bright spot, with US$50m in sales arriving 6.5% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$4.60, some 4.6% below consensus predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Axsome Therapeutics

Following the latest results, Axsome Therapeutics' 16 analysts are now forecasting revenues of US$180.9m in 2023. This would be a huge 261% improvement in sales compared to the last 12 months. Losses are forecast to narrow 7.7% to US$3.97 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$185.8m and losses of US$3.11 per share in 2023. While this year's revenue estimates dropped there was also a very substantial increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.

The average price target was broadly unchanged at US$108, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Axsome Therapeutics at US$210 per share, while the most bearish prices it at US$52.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Axsome Therapeutics' rate of growth is expected to accelerate meaningfully, with the forecast 261% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 104% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.8% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Axsome Therapeutics is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

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

However, before you get too enthused, we've discovered 1 warning sign for Axsome Therapeutics that you should be aware of.

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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.