One thing we could say about the analysts on Editas Medicine, Inc. (NASDAQ:EDIT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. The stock price has risen 7.4% to US$30.41 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, the current consensus, from the nine analysts covering Editas Medicine, is for revenues of US$19m in 2021, which would reflect a sizeable 79% reduction in Editas Medicine's sales over the past 12 months. Losses are supposed to balloon 113% to US$3.47 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$24m and losses of US$3.39 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 8.7% to US$38.11, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Editas Medicine at US$60.00 per share, while the most bearish prices it at US$14.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 79% revenue decline a notable change from historical growth of 50% 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 21% annually for the foreseeable future. It's pretty clear that Editas Medicine's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next 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 Editas Medicine's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Editas Medicine after today.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Editas Medicine's financials, such as recent substantial insider selling. For more information, you can click here to discover this and the 3 other concerns we've identified.
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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