Epizyme, Inc. (NASDAQ:EPZM) Analysts Just Trimmed Their Revenue Forecasts By 41%

One thing we could say about the analysts on Epizyme, Inc. (NASDAQ:EPZM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the most recent consensus for Epizyme from its six analysts is for revenues of US$44m in 2021 which, if met, would be a huge 181% increase on its sales over the past 12 months. Losses are forecast to hold steady at around US$2.27. However, before this estimates update, the consensus had been expecting revenues of US$75m and US$2.16 per share in losses. 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.

Check out our latest analysis for Epizyme

The consensus price target fell 7.6% to US$21.25, implicitly signalling that lower earnings per share are a leading indicator for Epizyme's valuation. 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 Epizyme at US$36.00 per share, while the most bearish prices it at US$10.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Epizyme's growth to accelerate, with the forecast 181% annualised growth to the end of 2021 ranking favourably alongside historical growth of 26% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 20% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Epizyme to grow faster than 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. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Epizyme after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Epizyme 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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