Things Look Grim For Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) After Today's Downgrade

Market forces rained on the parade of Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Shares are up 5.2% to US$54.59 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

After this downgrade, Enanta Pharmaceuticals' nine analysts are now forecasting revenues of US$108m in 2023. This would be a major 25% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$7.71 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$130m and losses of US$5.84 per share in 2023. 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.

See our latest analysis for Enanta Pharmaceuticals

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. 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 35% 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. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 15% annually. Not only are Enanta Pharmaceuticals' revenues expected to improve, it seems that the analysts are also expecting it 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 Enanta Pharmaceuticals. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After a cut like that, investors could be forgiven for thinking analysts are a lot more bearish on Enanta Pharmaceuticals, and a few readers might choose to steer clear of the stock.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Enanta Pharmaceuticals analysts - going out to 2025, 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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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.