Today is shaping up negative for Sage Therapeutics, Inc. (NASDAQ:SAGE) 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 downgrade, the current consensus from Sage Therapeutics' 20 analysts is for revenues of US$16m in 2021 which - if met - would reflect a huge 130% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$18m of revenue in 2021. The consensus view seems to have become more pessimistic on Sage Therapeutics, noting the measurable cut to revenue estimates in this update.
We'd point out that there was no major changes to their price target of US$94.95, suggesting the latest estimates were not enough to shift their view on the value of the business. 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 Sage Therapeutics analyst has a price target of US$190 per share, while the most pessimistic values it at US$60.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Sage Therapeutics' past performance and to peers in the same industry. The analysts are definitely expecting Sage Therapeutics' growth to accelerate, with the forecast 130% growth ranking favourably alongside historical growth of 34% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 21% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Sage Therapeutics to grow faster than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Sage Therapeutics next year. The analysts also expect revenues to grow faster than the wider market. 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 Sage Therapeutics after today.
But wait - there's more! We have estimates for Sage Therapeutics from its 20 analysts out until 2024, 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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