News Flash: 3 Analysts Think Sesen Bio, Inc. (NASDAQ:SESN) Earnings Are Under Threat

Today is shaping up negative for Sesen Bio, Inc. (NASDAQ:SESN) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Shares are up 7.0% to US$3.19 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the downgrade, the consensus from three analysts covering Sesen Bio is for revenues of US$10m in 2021, implying a definite 11% decline in sales compared to the last 12 months. Losses are expected to increase substantially, hitting US$0.43 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$15m and losses of US$0.39 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Sesen Bio

Analysts lifted their price target 105% to US$7.00, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Sesen Bio at US$7.00 per share, while the most bearish prices it at US$2.25. 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.

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 Sesen Bio'sdecline is expected to accelerate, with revenues forecast to fall 11% next year, topping off a historical decline of 5.8% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 20% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Sesen Bio to suffer worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Sesen Bio. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to next year's outlook, we wouldn't be surprised if investors were a bit wary of Sesen Bio.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Sesen Bio's financials, such as dilutive stock issuance over the past year. Learn more, and discover the 2 other risks we've identified, for 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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This article by Simply Wall St is general in nature. 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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