What Does The Future Hold For SAB Biotherapeutics, Inc. (NASDAQ:SABS)? These Analysts Have Been Cutting Their Estimates

The latest analyst coverage could presage a bad day for SAB Biotherapeutics, Inc. (NASDAQ:SABS), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the latest downgrade, the two analysts covering SAB Biotherapeutics provided consensus estimates of US$26m revenue in 2022, which would reflect a substantial 40% decline on its sales over the past 12 months. Losses are expected to be contained, narrowing 19% from last year to US$0.36. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$44m and losses of US$0.35 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for SAB Biotherapeutics

The consensus price target fell 29% to US$6.47, implicitly signalling that lower earnings per share are a leading indicator for SAB Biotherapeutics' valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic SAB Biotherapeutics analyst has a price target of US$12.40 per share, while the most pessimistic values it at US$4.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that SAB Biotherapeutics' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 64% to the end of 2022. This tops off a historical decline of 44% a year over the past year. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 15% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect SAB Biotherapeutics to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that SAB Biotherapeutics' revenues are expected to grow slower 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 SAB Biotherapeutics' future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on SAB Biotherapeutics after today.

There might be good reason for analyst bearishness towards SAB Biotherapeutics, like a short cash runway. Learn more, and discover the 3 other risks we've identified, for free on our platform here.

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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.