Some Analysts Just Cut Their Revolution Medicines, Inc. (NASDAQ:RVMD) Estimates

Today is shaping up negative for Revolution Medicines, Inc. (NASDAQ:RVMD) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At US$25.87, shares are up 6.3% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the consensus from nine analysts covering Revolution Medicines is for revenues of US$8.6m in 2023, implying a substantial 75% decline in sales compared to the last 12 months. Losses are supposed to balloon 40% to US$3.41 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$11m and losses of US$3.42 per share in 2023. 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 making no real change to the loss per share numbers.

Check out our latest analysis for Revolution Medicines

There was no real change to the consensus price target of US$31.56, suggesting that the revisions to revenue estimates are not expected to have a long-term impact on Revolution Medicines' valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Revolution Medicines, with the most bullish analyst valuing it at US$38.00 and the most bearish at US$23.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Revolution Medicines' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 85% to the end of 2023. This tops off a historical decline of 17% a year over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 19% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Revolution Medicines to suffer worse than the wider industry.

The Bottom Line

Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Revolution Medicines going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Revolution Medicines 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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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.