One thing we could say about the analysts on Karyopharm Therapeutics Inc. (NASDAQ:KPTI) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
After this downgrade, Karyopharm Therapeutics' nine analysts are now forecasting revenues of US$124m in 2021. This would be a solid 9.5% improvement in sales compared to the last 12 months. Per-share losses are expected to creep up to US$2.80. Yet before this consensus update, the analysts had been forecasting revenues of US$158m and losses of US$2.28 per share in 2021. 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.
The consensus price target fell 6.5% to US$27.20, implicitly signalling that lower earnings per share are a leading indicator for Karyopharm Therapeutics' 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. The most optimistic Karyopharm Therapeutics analyst has a price target of US$49.00 per share, while the most pessimistic values it at US$15.00. 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Karyopharm Therapeutics' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 13% growth on an annualised basis. This is compared to a historical growth rate of 68% over the past five years. Compare this to the 569 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 15% per year. So it's pretty clear that, while Karyopharm Therapeutics' revenue growth is expected to slow, it's expected to grow roughly in line with the 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 Karyopharm Therapeutics. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
That said, the analysts might have good reason to be negative on Karyopharm Therapeutics, given dilutive stock issuance over the past year. Learn more, and discover the 3 other flags we've identified, for free on our platform here.
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