Earnings Beat: Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) Just Beat Analyst Forecasts, And Analysts Have Been Lifting Their Forecasts

Shareholders might have noticed that Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) filed its second-quarter result this time last week. The early response was not positive, with shares down 7.1% to US$6.29 in the past week. Revenues were a bright spot, with US$14m in revenue arriving 8.5% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.40, some 6.3% below consensus predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Recursion Pharmaceuticals

After the latest results, the eight analysts covering Recursion Pharmaceuticals are now predicting revenues of US$69.9m in 2024. If met, this would reflect a major 41% improvement in revenue compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.63 per share. Before this latest report, the consensus had been expecting revenues of US$58.3m and US$1.62 per share in losses. So there's definitely been a change in sentiment in this update, with the analysts upgrading this year's revenue estimates, while at the same time holding losses per share steady.

The consensus price target fell 11% to US$11.43as the analysts signal that ongoing losses are likely to weigh on the stock price. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Recursion Pharmaceuticals, with the most bullish analyst valuing it at US$16.00 and the most bearish at US$8.00 per share. 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. It's clear from the latest estimates that Recursion Pharmaceuticals' rate of growth is expected to accelerate meaningfully, with the forecast 99% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 52% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 23% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Recursion Pharmaceuticals is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that 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 Recursion Pharmaceuticals going out to 2026, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Recursion Pharmaceuticals (at least 1 which doesn't sit too well with us) , and understanding these should be part of your investment process.

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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.