What You Need To Know About The Sage Therapeutics, Inc. (NASDAQ:SAGE) Analyst Downgrade Today

Today is shaping up negative for Sage Therapeutics, Inc. (NASDAQ:SAGE) shareholders, with the analysts delivering a substantial negative revision to this 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 consensus from 21 analysts covering Sage Therapeutics is for revenues of US$7.7m in 2021, implying a substantial 99% decline in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$7.33 per share in 2021. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$9.1m and losses of US$7.00 per share in 2021. 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 expecting losses per share to increase.

See our latest analysis for Sage Therapeutics

There was no major change to the consensus price target of US$83.58, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Sage Therapeutics, with the most bullish analyst valuing it at US$189 and the most bearish at US$45.00 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 100% by the end of 2021. This indicates a significant reduction from annual growth of 115% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.1% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sage Therapeutics is expected to lag 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 Sage Therapeutics' revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Sage Therapeutics going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Sage Therapeutics analysts - going out to 2023, and you can see them free on our platform here.

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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