Some Beam Therapeutics Inc. (NASDAQ:BEAM) Analysts Just Made A Major Cut To Next Year's Estimates

Today is shaping up negative for Beam Therapeutics Inc. (NASDAQ:BEAM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Bidders are definitely seeing a different story, with the stock price of US$73.50 reflecting a 13% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the latest downgrade, the current consensus, from the seven analysts covering Beam Therapeutics, is for revenues of US$22m in 2022, which would reflect a stressful 58% reduction in Beam Therapeutics' sales over the past 12 months. Losses are presumed to reduce, shrinking 16% from last year to US$4.65. However, before this estimates update, the consensus had been expecting revenues of US$49m and US$3.46 per share in losses. 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.

View our latest analysis for Beam Therapeutics

The consensus price target was broadly unchanged at US$122, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 Beam Therapeutics at US$155 per share, while the most bearish prices it at US$80.00. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Beam Therapeutics' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 58% by the end of 2022. This indicates a significant reduction from annual growth of 171% 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 12% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Beam Therapeutics is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Beam Therapeutics. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Beam Therapeutics after the downgrade.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Beam Therapeutics' financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other concerns we've identified.

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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.