Frequency Therapeutics, Inc. (NASDAQ:FREQ) Analysts Are Reducing Their Forecasts For This Year

Market forces rained on the parade of Frequency Therapeutics, Inc. (NASDAQ:FREQ) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Frequency Therapeutics from its five analysts is for revenues of US$36m in 2021 which, if met, would be a modest 2.7% increase on its sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching US$1.86. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$47m and losses of US$1.42 per share in 2021. 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.

See our latest analysis for Frequency Therapeutics

The consensus price target fell 5.3% to US$13.50, implicitly signalling that lower earnings per share are a leading indicator for Frequency Therapeutics' 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. There are some variant perceptions on Frequency Therapeutics, with the most bullish analyst valuing it at US$21.00 and the most bearish at US$6.00 per share. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Frequency Therapeutics' past performance and to peers in the same industry. For example, we noticed that Frequency Therapeutics' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 5.4% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 21% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 10.0% per year. Although Frequency Therapeutics' revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Frequency Therapeutics' revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

That said, the analysts might have good reason to be negative on Frequency Therapeutics, given dilutive stock issuance over the past year. Learn more, and discover the 3 other warning signs we've identified, for 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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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.
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