Legend Biotech Corporation (NASDAQ:LEGN) Analysts Are More Bearish Than They Used To Be

One thing we could say about the analysts on Legend Biotech Corporation (NASDAQ:LEGN) - 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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the five analysts covering Legend Biotech are now predicting revenues of US$134m in 2022. If met, this would reflect a sizeable 44% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 27% to US$1.68. Yet before this consensus update, the analysts had been forecasting revenues of US$334m and losses of US$1.02 per share in 2022. 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.

See our latest analysis for Legend Biotech

The consensus price target lifted 5.7% to US$67.67, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. 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. The most optimistic Legend Biotech analyst has a price target of US$75.00 per share, while the most pessimistic values it at US$51.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Legend Biotech shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Legend Biotech's rate of growth is expected to accelerate meaningfully, with the forecast 34% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 23% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Legend Biotech is expected to grow much faster than its 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 Legend Biotech. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The rising price target is a puzzle, but still - with a serious cut to next year's outlook, we wouldn't be surprised if investors were a bit wary of Legend Biotech.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Legend Biotech analysts - going out to 2024, 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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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.