New Forecasts: Here's What Analysts Think The Future Holds For MEI Pharma, Inc. (NASDAQ:MEIP)

MEI Pharma, Inc. (NASDAQ:MEIP) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Investor sentiment seems to be improving too, with the share price up 8.4% to US$0.31 over the past 7 days. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.

After the upgrade, the consensus from MEI Pharma's six analysts is for revenues of US$38m in 2023, which would reflect a sizeable 39% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching US$0.30 per share. However, before this estimates update, the consensus had been expecting revenues of US$24m and US$0.65 per share in losses. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

Check out our latest analysis for MEI Pharma

Yet despite these upgrades, the analysts cut their price target 33% to US$1.72, implicitly signalling that the ongoing losses are likely to weigh negatively on MEI Pharma's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values MEI Pharma at US$4.00 per share, while the most bearish prices it at US$0.10. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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. We would highlight that sales are expected to reverse, with a forecast 63% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 50% 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 15% 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 most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around MEI Pharma's prospects. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. A lower price target is not intuitively what we would expect from a company whose business prospects are improving - at least judging by these forecasts - but if the underlying fundamentals are strong, MEI Pharma could be one for the watch list.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. 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.