Earnings Update: Otonomy, Inc. (NASDAQ:OTIC) Just Reported And Analysts Are Boosting Their Estimates

Investors in Otonomy, Inc. (NASDAQ:OTIC) had a good week, as its shares rose 7.5% to close at US$3.85 following the release of its quarterly results. Revenues of US$50k came in 9.1% below estimates, but statutory losses were slightly better than expected, at US$0.22 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Otonomy

Taking into account the latest results, the most recent consensus for Otonomy from five analysts is for revenues of US$8.90m in 2021 which, if met, would be a sizeable 2,194% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 28% to US$1.03. Before this earnings announcement, the analysts had been modelling revenues of US$7.82m and losses of US$1.09 per share in 2021. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to next year's revenue estimates, while at the same time reducing their loss estimates.

It will come as no surprise to learn thatthe analysts have increased their price target for Otonomy 6.8% to US$9.40on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Otonomy at US$11.00 per share, while the most bearish prices it at US$8.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Otonomy's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow many times over, well above its historical decline of 36% a year over the past three years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 6.6% next year. So it looks like Otonomy is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Otonomy. Long-term earnings power is much more important than next year's profits. We have forecasts for Otonomy going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Otonomy (2 are significant!) that you need to be mindful of.

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