What You Need To Know About The Cytokinetics, Incorporated (NASDAQ:CYTK) Analyst Downgrade Today

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. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the consensus from ten analysts covering Cytokinetics is for revenues of US$20m in 2022, implying a substantial 70% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$4.32 per share. However, before this estimates update, the consensus had been expecting revenues of US$25m and US$3.94 per share in losses. 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.

Check out our latest analysis for Cytokinetics

The consensus price target was broadly unchanged at US$58.54, 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 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it's the idea that Cytokinetics' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 80% to the end of 2022. This tops off a historical decline of 0.1% a year over the past five years. 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 it's pretty clear that, while it does have declining revenues, the analysts also expect Cytokinetics to suffer worse than 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 Cytokinetics. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Cytokinetics after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Cytokinetics analysts - going out to 2024, and you can see them free on our platform here.

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