Oyster Point Pharma, Inc. (NASDAQ:OYST) Analysts Are Cutting Their Estimates: Here's What You Need To Know

There's been a notable change in appetite for Oyster Point Pharma, Inc. (NASDAQ:OYST) shares in the week since its second-quarter report, with the stock down 11% to US$7.01. The statutory results were not great - while revenues of US$4.7m were in line with expectations,Oyster Point Pharma lost US$1.87 a share in the process. Following the result, the 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Oyster Point Pharma

Following last week's earnings report, Oyster Point Pharma's four analysts are forecasting 2022 revenues to be US$31.4m, approximately in line with the last 12 months. Per-share losses are predicted to creep up to US$6.24. Before this earnings announcement, the analysts had been modelling revenues of US$35.0m and losses of US$6.06 per share in 2022. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The consensus price target fell 6.2% to US$28.60, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Oyster Point Pharma analyst has a price target of US$65.00 per share, while the most pessimistic values it at US$15.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 3.3% by the end of 2022. This indicates a significant reduction from annual growth of 135% over the last three 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. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Oyster Point Pharma is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Oyster Point Pharma analysts - going out to 2024, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Oyster Point Pharma , and understanding them should be part of your investment process.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.