Seres Therapeutics, Inc. (NASDAQ:MCRB) shares fell 6.2% to US$3.35 in the week since its latest full-year results. Revenues were a bright spot, with US$35m in sales arriving 4.1% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$1.24, some 2.9% below consensus predictions. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus, from the five analysts covering Seres Therapeutics, is for revenues of US$31.4m in 2020, which would reflect an uncomfortable 9.0% reduction in Seres Therapeutics's sales over the past 12 months. Statutory losses are expected to increase slightly, to US$1.13 per share. Before this earnings announcement, analysts had been forecasting revenues of US$34.7m and losses of US$0.90 per share in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
There was no major change to the consensus price target of US$7.35, 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. There are some variant perceptions on Seres Therapeutics, with the most bullish analyst valuing it at US$11.00 and the most bearish at US$3.75 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that sales are expected to reverse, with the forecast 9.0% revenue decline a notable change from historical growth of 15% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 16% annually for the foreseeable future. It's pretty clear that Seres Therapeutics's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts reduced their loss per share estimates for next year, perhaps highlighting increased optimism around Seres Therapeutics's prospects. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Seres Therapeutics going out to 2024, and you can see them free on our platform here.
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