Today is shaping up negative for Precigen, Inc. (NASDAQ:PGEN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the five analysts covering Precigen, is for revenues of US$80m in 2021, which would reflect a substantial 23% reduction in Precigen's sales over the past 12 months. Losses are expected to increase substantially, hitting US$0.70 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$90m and losses of US$0.61 per share in 2021. 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 expecting losses per share to increase.
Analysts lifted their price target 12% to US$11.83, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. There are some variant perceptions on Precigen, with the most bullish analyst valuing it at US$14.00 and the most bearish at US$6.00 per share. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Precigen's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 23% to the end of 2021. This tops off a historical decline of 15% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 18% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Precigen to suffer worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Precigen 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 downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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