What You Need To Know About The Prothena Corporation plc (NASDAQ:PRTA) Analyst Downgrade Today

The latest analyst coverage could presage a bad day for Prothena Corporation plc (NASDAQ:PRTA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Investors however, have been notably more optimistic about Prothena recently, with the stock price up a majestic 44% to US$75.76 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the latest downgrade, the ten analysts covering Prothena provided consensus estimates of US$17m revenue in 2023, which would reflect a substantial 69% decline on its sales over the past 12 months. Losses are supposed to balloon 68% to US$4.07 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$24m and losses of US$3.80 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Prothena

The consensus price target lifted 7.6% to US$92.10, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. 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 Prothena at US$120 per share, while the most bearish prices it at US$60.00. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 79% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 56% 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 18% per year. It's pretty clear that Prothena's revenues are expected to perform substantially 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. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Prothena after today.

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 Prothena going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.