The latest analyst coverage could presage a bad day for bluebird bio, Inc. (NASDAQ:BLUE), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the latest downgrade, the current consensus, from the 21 analysts covering bluebird bio, is for revenues of US$124m in 2021, which would reflect a stressful 50% reduction in bluebird bio's sales over the past 12 months. Losses are expected to increase slightly, to US$11.24 per share. However, before this estimates update, the consensus had been expecting revenues of US$145m and US$11.23 per share in losses. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.
the analysts have cut their price target 25% to US$58.94 per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on bluebird bio, with the most bullish analyst valuing it at US$146 and the most bearish at US$48.00 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 50%, a significant reduction from annual growth of 58% 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 20% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - bluebird bio is expected to lag 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. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of bluebird bio's future valuation. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of bluebird bio going forwards.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple bluebird bio analysts - going out to 2025, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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What are the risks and opportunities for bluebird bio?
Revenue is forecast to grow 44.98% per year
Has less than 1 year of cash runway
Shareholders have been diluted in the past year
Significant insider selling over the past 3 months
Volatile share price over the past 3 months
Currently unprofitable and not forecast to become profitable over the next 3 years
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