Analysts Have Just Cut Their IDEAYA Biosciences, Inc. (NASDAQ:IDYA) Revenue Estimates By 6.2%

The latest analyst coverage could presage a bad day for IDEAYA Biosciences, Inc. (NASDAQ:IDYA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. The stock price has risen 5.6% to US$10.38 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following this downgrade, IDEAYA Biosciences' seven analysts are forecasting 2022 revenues to be US$29m, approximately in line with the last 12 months. Per-share losses are expected to explode, reaching US$2.27 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$30m and losses of US$2.22 per share in 2022. So it's pretty clear consensus is more negative on IDEAYA Biosciences after the new consensus numbers; while the analysts trimmed their revenue estimates, they also administered a modest increase to per-share loss expectations.

See our latest analysis for IDEAYA Biosciences

The consensus price target fell 8.5% to US$18.57, implicitly signalling that lower earnings per share are a leading indicator for IDEAYA Biosciences' 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. Currently, the most bullish analyst values IDEAYA Biosciences at US$23.00 per share, while the most bearish prices it at US$13.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. We would highlight that sales are expected to reverse, with a forecast 3.8% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 85% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 16% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - IDEAYA Biosciences is expected to lag 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 IDEAYA Biosciences. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that IDEAYA Biosciences' revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of IDEAYA Biosciences' future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of IDEAYA Biosciences going forwards.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with IDEAYA Biosciences' business, like 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.