Analyst Forecasts Just Became More Bearish On Precision BioSciences, Inc. (NASDAQ:DTIL)

Market forces rained on the parade of Precision BioSciences, Inc. (NASDAQ:DTIL) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from six analysts covering Precision BioSciences is for revenues of US$25m in 2022, implying a sizeable 78% decline in sales compared to the last 12 months. Losses are supposed to balloon 355% to US$2.28 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$34m and losses of US$2.07 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Precision BioSciences

The consensus price target fell 19% to US$13.71, implicitly signalling that lower earnings per share are a leading indicator for Precision BioSciences' valuation. 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. The most optimistic Precision BioSciences analyst has a price target of US$20.00 per share, while the most pessimistic values it at US$5.00. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Precision BioSciences' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 78% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 58% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Precision BioSciences is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. 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 Precision BioSciences' future valuation. 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 Precision BioSciences after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Precision BioSciences going out to 2024, 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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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.