Bearish: Analysts Just Cut Their Kadmon Holdings, Inc. (NASDAQ:KDMN) Revenue and EPS estimates

By
Simply Wall St
Published
January 21, 2021
NasdaqGS:KDMN
Source: Shutterstock

One thing we could say about the analysts on Kadmon Holdings, Inc. (NASDAQ:KDMN) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Kadmon Holdings recently, with the stock price up a remarkable 13% to US$4.85 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the latest consensus from Kadmon Holdings' five analysts is for revenues of US$21m in 2021, which would reflect a sizeable 76% improvement in sales compared to the last 12 months. Per-share losses are expected to creep up to US$0.61. Yet before this consensus update, the analysts had been forecasting revenues of US$34m and losses of US$0.55 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Kadmon Holdings

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NasdaqGS:KDMN Earnings and Revenue Growth January 21st 2021

There was no major change to the consensus price target of US$12.83, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Kadmon Holdings analyst has a price target of US$25.00 per share, while the most pessimistic values it at US$8.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Kadmon Holdings' past performance and to peers in the same industry. One thing stands out from these estimates, which is that Kadmon Holdings is forecast to grow faster in the future than it has in the past, with revenues expected to grow 76%. If achieved, this would be a much better result than the 48% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 20% next year. Not only are Kadmon Holdings' 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 Kadmon Holdings. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected next year, we wouldn't be surprised if investors were a bit wary of Kadmon Holdings.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Kadmon Holdings going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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