Need To Know: Analysts Are Much More Bullish On MEI Pharma, Inc. (NASDAQ:MEIP)

Celebrations may be in order for MEI Pharma, Inc. (NASDAQ:MEIP) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market may be pricing in some blue sky too, with the share price gaining 15% to US$0.39 in the last 7 days. Could this upgrade be enough to drive the stock even higher?

Following the latest upgrade, the current consensus, from the five analysts covering MEI Pharma, is for revenues of US$30m in 2023, which would reflect a disturbing 27% reduction in MEI Pharma's sales over the past 12 months. Losses are supposed to balloon 47% to US$0.59 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$21m and losses of US$0.78 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

Check out the opportunities and risks within the US Biotechs industry.

The consensus price target rose 12% to US$5.83, with the analysts encouraged by the higher revenue and lower forecast losses for this year. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic MEI Pharma analyst has a price target of US$15.00 per share, while the most pessimistic values it at US$2.00. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 34% by the end of 2023. This indicates a significant reduction from annual growth of 44% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 14% per year. It's pretty clear that MEI Pharma's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting MEI Pharma is moving incrementally towards profitability. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, MEI Pharma could be worth investigating further.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple MEI Pharma analysts - going out to 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks 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.