Celebrations may be in order for Inovio Pharmaceuticals, Inc. (NASDAQ:INO) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. The market seems to be pricing in some improvement in the business too, with the stock up 6.6% over the past week, closing at US$11.22. Could this big upgrade push the stock even higher?
Following the upgrade, the most recent consensus for Inovio Pharmaceuticals from its eight analysts is for revenues of US$143m in 2021 which, if met, would be a substantial increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 55% to US$0.59. However, before this estimates update, the consensus had been expecting revenues of US$145m and US$0.47 per share in losses. So it's pretty clear the analysts have mixed opinions on Inovio Pharmaceuticals even after this update; although they reconfirmed their revenue numbers, it came at the cost of a per-share losses.
As a result, there was no major change to the consensus price target of US$13.29, with the analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. 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. Currently, the most bullish analyst values Inovio Pharmaceuticals at US$25.00 per share, while the most bearish prices it at US$8.00. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Inovio Pharmaceuticals is forecast to grow faster in the future than it has in the past, with revenues expected to grow many times over. If achieved, this would be a much better result than the 31% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 21% per year. Not only are Inovio Pharmaceuticals' revenues expected to improve, it seems that the analysts are also expecting it 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 Inovio Pharmaceuticals. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Inovio Pharmaceuticals' revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to next year's earnings expectations, it might be time to take another look at Inovio Pharmaceuticals.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential flags with Inovio Pharmaceuticals, including major dilution from new stock issuance in the past year. You can learn more, and discover the 3 other flags we've identified, for free on our platform here.
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