The FibroGen, Inc. (NASDAQ:FGEN) Analysts Have Been Trimming Their Sales Forecasts

Market forces rained on the parade of FibroGen, Inc. (NASDAQ:FGEN) shareholders today, when the analysts downgraded their forecasts for next year. 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 latest consensus from FibroGen's seven analysts is for revenues of US$179m in 2023, which would reflect a substantial 46% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 40% to US$2.31. Yet before this consensus update, the analysts had been forecasting revenues of US$217m and losses of US$2.26 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

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Analysts lifted their price target 9.3% to US$16.40, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on FibroGen, with the most bullish analyst valuing it at US$23.00 and the most bearish at US$9.00 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.

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. It's clear from the latest estimates that FibroGen's rate of growth is expected to accelerate meaningfully, with the forecast 35% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 5.6% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect FibroGen 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 next year, suggesting all may not be well at FibroGen. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on FibroGen after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple FibroGen analysts - going out to 2024, and you can see them free on our platform here.

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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.