Analysts Just Shaved Their Scilex Holding Company (NASDAQ:SCLX) Forecasts Dramatically

Market forces rained on the parade of Scilex Holding Company (NASDAQ:SCLX) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 26% to US$1.49 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the current consensus from Scilex Holding's three analysts is for revenues of US$58m in 2024 which - if met - would reflect a huge 24% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 47% to US$0.71 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$72m and losses of US$0.47 per share in 2024. 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.

Check out our latest analysis for Scilex Holding

The consensus price target was broadly unchanged at US$5.33, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation.

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. The analysts are definitely expecting Scilex Holding's growth to accelerate, with the forecast 34% annualised growth to the end of 2024 ranking favourably alongside historical growth of 13% 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 10% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Scilex Holding to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Scilex Holding. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Scilex Holding after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Scilex Holding analysts - going out to 2026, 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 with high insider ownership.

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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.

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