A week ago, Fate Therapeutics, Inc. (NASDAQ:FATE) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. Revenues of US$2.4m beat estimates by a substantial 38% margin. Unfortunately, Fate Therapeutics also reported a loss of US$0.40 per share, which at least was smaller than analysts expected. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We’ve gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the eleven analysts covering Fate Therapeutics provided consensus estimates of US$6.6m revenue in 2020, which would reflect a painful 31% decline on its sales over the past 12 months. Losses are expected to reduce, shrinking 19% from last year to US$1.56. Yet prior to the latest earnings, analysts had been forecasting revenues of US$8.9m and losses of US$1.55 per share in 2020. So there’s been quite a change-up of views after the latest results, with analysts making a serious cut to their revenue forecasts while also granting a to the earnings per share numbers.
The consensus price target was broadly unchanged at US$25.07, implying that the business is performing roughly in line with expectations, despite a downwards adjustment to forecast sales next year. 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. There are some variant perceptions on Fate Therapeutics, with the most bullish analyst valuing it at US$32.00 and the most bearish at US$16.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how analyst forecasts compare, both to the Fate Therapeutics’s past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 31% a significant reduction from annual growth of 32% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 17% next year. It’s pretty clear that Fate Therapeutics’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$25.07, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Fate Therapeutics analysts – going out to 2023, and you can see them free on our platform here.
We also provide an overview of the Fate Therapeutics Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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