Market forces rained on the parade of Seagen Inc. (NASDAQ:SGEN) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
After this downgrade, Seagen's 18 analysts are now forecasting revenues of US$1.8b in 2022. This would be a notable 13% improvement in sales compared to the last 12 months. Losses are forecast to hold steady at around US$3.64. However, before this estimates update, the consensus had been expecting revenues of US$2.2b and US$0.99 per share in losses. 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.
The consensus price target fell 15% to US$162, implicitly signalling that lower earnings per share are a leading indicator for Seagen's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Seagen, with the most bullish analyst valuing it at US$201 and the most bearish at US$120 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. We would highlight that Seagen's revenue growth is expected to slow, with the forecast 13% annualised growth rate until the end of 2022 being well below the historical 36% p.a. growth over the last five years. Compare this to the 656 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 14% per year. Factoring in the forecast slowdown in growth, it looks like Seagen is forecast to grow at about the same rate as 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. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Seagen.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Seagen analysts - going out to 2024, 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.
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.