It’s been a sad week for Fate Therapeutics, Inc. (NASDAQ:FATE), who’ve watched their investment drop 11% to US$28.25 in the week since the company reported its annual result. Results were mixed, with revenues of US$11m beating expectations by 11%. Fate Therapeutics continued to be lossmaking, reporting a US$1.44 statutory loss per share, in line with analyst forecasts. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the consensus from Fate Therapeutics’s twelve analysts is for revenues of US$7.16m in 2020, which would reflect a concerning 33% decline in sales compared to the last year of performance. Losses are expected to be contained, narrowing 19% from last year to US$1.71, on a statutory basis. Before this latest report, the consensus had been expecting revenues of US$7.45m and US$1.64 per share in losses. Although analysts have lowered their sales forecasts, they’ve also made a their earnings per share estimates, which implies there’s been something of an uptick in sentiment following the latest results.
Analysts lifted their price target 34% to US$36.31, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock’s value. 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. Currently, the most bullish analyst values Fate Therapeutics at US$57.00 per share, while the most bearish prices it at US$20.00. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. With this in mind, we wouldn’t assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Further, we can compare these estimates to past performance, and see how Fate Therapeutics forecasts compare to the wider market’s forecast performance. We would highlight that sales are expected to reverse, with the forecast 33% revenue decline a notable change from historical growth of 35% over the last three years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 16% 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 reduced their loss per share estimates for next year, perhaps highlighting increased optimism around Fate Therapeutics’s prospects. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Fate Therapeutics going out to 2024, 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.
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