Cytokinetics, Incorporated (NASDAQ:CYTK) Analysts Just Cut Their EPS Forecasts Substantially

The analysts covering Cytokinetics, Incorporated (NASDAQ:CYTK) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Cytokinetics recently, with the stock price up a remarkable 20% to US$37.63 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the latest downgrade, the current consensus, from the eleven analysts covering Cytokinetics, is for revenues of US$25m in 2022, which would reflect a substantial 65% reduction in Cytokinetics' sales over the past 12 months. Losses are supposed to balloon 55% to US$3.94 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$57m and losses of US$3.33 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Cytokinetics

The consensus price target was broadly unchanged at US$56.31, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Cytokinetics at US$75.00 per share, while the most bearish prices it at US$46.00. 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. Over the past five years, revenues have declined around 10% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 65% decline in revenue until the end of 2022. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 12% per year. So while a broad number of companies are forecast to grow, unfortunately Cytokinetics is expected to see its sales affected worse than other companies in the 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 Cytokinetics. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Cytokinetics' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Cytokinetics.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Cytokinetics analysts - 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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