Downgrade: Here's How Analysts See Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) Performing In The Near Term

The analysts covering Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the eight analysts covering Enanta Pharmaceuticals are now predicting revenues of US$135m in 2023. If met, this would reflect a substantial 57% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 19% from last year to US$4.77. Yet before this consensus update, the analysts had been forecasting revenues of US$150m and losses of US$3.86 per share in 2023. 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.

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The consensus price target was broadly unchanged at US$70.78, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. There are some variant perceptions on Enanta Pharmaceuticals, with the most bullish analyst valuing it at US$96.00 and the most bearish at US$50.00 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Enanta Pharmaceuticals is forecast to grow faster in the future than it has in the past, with revenues expected to display 57% annualised growth until the end of 2023. If achieved, this would be a much better result than the 16% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 14% per year. So it looks like Enanta Pharmaceuticals is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Enanta Pharmaceuticals after the downgrade.

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 Enanta Pharmaceuticals going out to 2025, and you can see them free on our platform here.

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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.