New Forecasts: Here's What Analysts Think The Future Holds For Revolution Medicines, Inc. (NASDAQ:RVMD)

Revolution Medicines, Inc. (NASDAQ:RVMD) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that Revolution Medicines will make substantially more sales than they'd previously expected. Revolution Medicines has also found favour with investors, with the stock up a noteworthy 17% to US$23.76 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

Following the upgrade, the latest consensus from Revolution Medicines' eight analysts is for revenues of US$34m in 2022, which would reflect a substantial 26% improvement in sales compared to the last 12 months. Losses are supposed to balloon 44% to US$3.42 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$30m and losses of US$3.50 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

See our latest analysis for Revolution Medicines

The consensus price target fell 5.6%, to US$28.33, suggesting that the analysts remain pessimistic on the company, despite the improved earnings and revenue outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Revolution Medicines at US$40.00 per share, while the most bearish prices it at US$19.00. 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.

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. For example, we noticed that Revolution Medicines' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 58% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 35% a year over the past year. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 15% annually. So it looks like Revolution Medicines is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Revolution Medicines' prospects. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Revolution Medicines' future valuation. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Revolution Medicines.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 3 potential risks with Revolution Medicines, including dilutive stock issuance over the past year. For more information, you can click through to our platform to learn more about this and the 2 other risks we've identified .

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.