What Does The Future Hold For Molecular Templates, Inc. (NASDAQ:MTEM)? These Analysts Have Been Cutting Their Estimates

Market forces rained on the parade of Molecular Templates, Inc. (NASDAQ:MTEM) shareholders today, when the analysts downgraded their forecasts for next year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Shares are up 7.3% to US$0.64 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the five analysts covering Molecular Templates provided consensus estimates of US$17m revenue in 2023, which would reflect a concerning 51% decline on its sales over the past 12 months. Losses are expected to increase slightly, to US$1.57 per share. However, before this estimates update, the consensus had been expecting revenues of US$24m and US$1.56 per share in losses. 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 making no real change to the loss per share numbers.

Our analysis indicates that MTEM is potentially overvalued!

Analysts lifted their price target 56% to US$13.00 per share, with reduced revenue estimates seemingly not expected to have a long-term impact on the intrinsic value of the business. 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 Molecular Templates analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$9.00. 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.

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 44% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 34% 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 Molecular Templates' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Molecular Templates' revenues are expected to grow slower than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Molecular Templates after today.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Molecular Templates' financials, such as a short cash runway. For more information, you can click here to discover this and the 3 other flags we've identified.

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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.