Frequency Therapeutics, Inc. (NASDAQ:FREQ) Just Reported Third-Quarter Earnings: Have Analysts Changed Their Mind On The Stock?

Frequency Therapeutics, Inc. (NASDAQ:FREQ) investors will be delighted, with the company turning in some strong numbers with its latest results. Sales crushed expectations at US$11m, beating expectations by 91%. Frequency Therapeutics reported a statutory loss of US$0.16 per share, which - although not amazing - was much smaller than the analysts predicted. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Frequency Therapeutics

Following the latest results, Frequency Therapeutics' four analysts are now forecasting revenues of US$60.4m in 2021. This would be a sizeable 90% improvement in sales compared to the last 12 months. Statutory losses are forecast to balloon 50% to US$0.35 per share. In the lead-up to this report, the analysts had been modelling revenues of US$63.1m and earnings per share (EPS) of US$0.008 in 2021. The analysts have made an abrupt about-face on Frequency Therapeutics, administering a minor downgrade to to revenue forecasts and slashing the earnings outlook from a profit to loss.

There was no major change to the consensus price target of US$32.33, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Frequency Therapeutics analyst has a price target of US$36.00 per share, while the most pessimistic values it at US$27.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

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. It's clear from the latest estimates that Frequency Therapeutics' rate of growth is expected to accelerate meaningfully, with the forecast 90% revenue growth noticeably faster than its historical growth of 31% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 21% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Frequency Therapeutics is expected to grow much faster than its industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Frequency Therapeutics dropped from profits to a loss next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Frequency Therapeutics going out to 2024, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 3 warning signs for Frequency Therapeutics (1 is significant!) that you should be aware of.

If you decide to trade Frequency Therapeutics, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.