Analyst Forecasts Just Became More Bearish On Relay Therapeutics, Inc. (NASDAQ:RLAY)

Today is shaping up negative for Relay Therapeutics, Inc. (NASDAQ:RLAY) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the current consensus, from the twelve analysts covering Relay Therapeutics, is for revenues of US$3.1m in 2024, which would reflect a sizeable 88% reduction in Relay Therapeutics' sales over the past 12 months. Losses are expected to increase substantially, hitting US$3.05 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$3.7m and losses of US$3.07 per share in 2024. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.

See our latest analysis for Relay Therapeutics

The consensus price target was broadly unchanged at US$22.51, implying that the business is performing roughly in line with expectations, despite a downwards adjustment to forecast sales next year.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Relay Therapeutics' past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Relay Therapeutics' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 82% to the end of 2024. This tops off a historical decline of 7.3% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 16% annually. So while a broad number of companies are forecast to grow, unfortunately Relay Therapeutics is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Relay Therapeutics' revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Relay Therapeutics going forwards.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Relay Therapeutics' business, like dilutive stock issuance over the past year. Learn more, and discover the 2 other warning signs 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.