Broker Revenue Forecasts For Equillium, Inc. (NASDAQ:EQ) Are Surging Higher

Equillium, Inc. (NASDAQ:EQ) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The revenue forecast for this year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline.

Following the latest upgrade, the five analysts covering Equillium provided consensus estimates of US$14m revenue in 2023, which would reflect a not inconsiderable 8.8% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 44% to US$1.02. Yet before this consensus update, the analysts had been forecasting revenues of US$12m and losses of US$1.07 per share in 2023. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

See our latest analysis for Equillium

The consensus price target fell 31%, to US$6.46, suggesting that the analysts remain pessimistic on the company, despite the improved earnings and revenue outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Equillium at US$10.00 per share, while the most bearish prices it at US$2.80. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 8.8% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 114% 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 15% annually for the foreseeable future. It's pretty clear that Equillium's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Equillium is moving incrementally towards profitability. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower 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 that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Equillium.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Equillium analysts - going out to 2025, and you can see them free on our platform here.

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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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.