Last week saw the newest quarterly earnings release from Editas Medicine, Inc. (NASDAQ:EDIT), an important milestone in the company's journey to build a stronger business. Revenues beat expectations by 889%, and sales of US$63m were sufficient to generate a statutory profit of US$0.12 - a pleasant surprise given that the analysts were forecasting a loss! Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the seven analysts covering Editas Medicine provided consensus estimates of US$22.2m revenue in 2021, which would reflect a sizeable 32% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$3.29 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$23.8m and losses of US$3.39 per share in 2021. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers fell somewhat.
The consensus price target fell 8.7% to US$38.11, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Editas Medicine at US$60.00 per share, while the most bearish prices it at US$14.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on 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. We would highlight that sales are expected to reverse, with the forecast 32% revenue decline a notable change from historical growth of 42% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 20% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Editas Medicine is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Editas Medicine's future valuation.
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 Editas Medicine analysts - going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Editas Medicine that we have uncovered.
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