Some Analysts Just Cut Their Gritstone bio, Inc. (NASDAQ:GRTS) Estimates

The analysts covering Gritstone bio, Inc. (NASDAQ:GRTS) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After the downgrade, the consensus from Gritstone bio's four analysts is for revenues of US$11m in 2022, which would reflect a disturbing 76% decline in sales compared to the last year of performance. Losses are supposed to balloon 50% to US$1.55 per share. However, before this estimates update, the consensus had been expecting revenues of US$26m and US$1.41 per share in losses. 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 Gritstone bio

The consensus price target fell 17% to US$14.67, implicitly signalling that lower earnings per share are a leading indicator for Gritstone bio's valuation. 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. There are some variant perceptions on Gritstone bio, with the most bullish analyst valuing it at US$20.00 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 76% by the end of 2022. This indicates a significant reduction from annual growth of 83% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% per year. It's pretty clear that Gritstone bio's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Gritstone bio. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Gritstone bio going forwards.

There might be good reason for analyst bearishness towards Gritstone bio, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other warning signs we've identified.

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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.