One RedHill Biopharma Ltd. (NASDAQ:RDHL) Analyst Has Been Cutting Their Forecasts

Today is shaping up negative for RedHill Biopharma Ltd. (NASDAQ:RDHL) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the consensus from RedHill Biopharma's solitary analyst is for revenues of US$68m in 2022, which would reflect an uneasy 9.5% decline in sales compared to the last year of performance. The loss per share is anticipated to greatly reduce in the near future, narrowing 95% to US$0.07. Yet prior to the latest estimates, the analyst had been forecasting revenues of US$88m and losses of US$0.07 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also making no real change to the loss per share numbers.

Our analysis indicates that RDHL is potentially overvalued!

the analyst has cut their price target 42% to US$4.50 per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation.

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 18% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 60% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - RedHill Biopharma is expected to lag the wider industry.

The Bottom Line

Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that RedHill Biopharma's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with the analyst seemingly not reassured by recent business developments, leading to a lower estimate of RedHill Biopharma's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of RedHill Biopharma going forwards.

There might be good reason for analyst bearishness towards RedHill Biopharma, like dilutive stock issuance over the past year. Learn more, and discover the 3 other concerns we've identified, for 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.