Denali Therapeutics Inc. (NASDAQ:DNLI) Analysts Just Slashed This Year's Estimates

One thing we could say about the analysts on Denali Therapeutics Inc. (NASDAQ:DNLI) - 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) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from Denali Therapeutics' twelve analysts is for revenues of US$82m in 2022 which - if met - would reflect a major 68% increase on its sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching US$2.70. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$97m and losses of US$2.40 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.

Check out our latest analysis for Denali Therapeutics

The consensus price target was broadly unchanged at US$78.42, 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. There are some variant perceptions on Denali Therapeutics, with the most bullish analyst valuing it at US$111 and the most bearish at US$41.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 68% growth on an annualised basis. That is in line with its 57% annual growth 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 revenues grow 12% per year. So although Denali Therapeutics is expected to maintain its revenue growth rate, it's definitely expected to grow faster 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 Denali Therapeutics. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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 Denali Therapeutics.

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 Denali Therapeutics 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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