Time To Worry? Analysts Are Downgrading Their Avid Bioservices, Inc. (NASDAQ:CDMO) Outlook

One thing we could say about the analysts on Avid Bioservices, Inc. (NASDAQ:CDMO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the four analysts covering Avid Bioservices are now predicting revenues of US$157m in 2024. If met, this would reflect a modest 5.0% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to jump 152% to US$0.022. Prior to this update, the analysts had been forecasting revenues of US$181m and earnings per share (EPS) of US$0.12 in 2024. Indeed, we can see that the analysts are a lot more bearish about Avid Bioservices' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Avid Bioservices

It'll come as no surprise then, to learn that the analysts have cut their price target 6.7% to US$20.75. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Avid Bioservices at US$24.00 per share, while the most bearish prices it at US$17.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. It's pretty clear that there is an expectation that Avid Bioservices' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 5.0% growth on an annualised basis. This is compared to a historical growth rate of 26% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 16% annually. Factoring in the forecast slowdown in growth, it seems obvious that Avid Bioservices is also expected to grow slower than other industry participants.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Avid Bioservices. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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.

That said, the analysts might have good reason to be negative on Avid Bioservices, given its declining profit margins. Learn more, and discover the 2 other warning signs 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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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.