Earnings Update: Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) Just Reported And Analysts Are Boosting Their Estimates

Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) investors will be delighted, with the company turning in some strong numbers with its latest results. Sales crushed expectations at US$16m, beating expectations by 42%. Spectrum Pharmaceuticals reported a statutory loss of US$0.02 per share, which - although not amazing - was much smaller than the analysts predicted. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Spectrum Pharmaceuticals

Taking into account the latest results, the most recent consensus for Spectrum Pharmaceuticals from five analysts is for revenues of US$69.3m in 2023 which, if met, would be a major 169% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 55% to US$0.15. Before this latest report, the consensus had been expecting revenues of US$54.5m and US$0.17 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

There was no major change to the consensus price target of US$1.93, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Spectrum Pharmaceuticals at US$3.50 per share, while the most bearish prices it at US$1.14. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. For example, we noticed that Spectrum Pharmaceuticals' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 275% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 70% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 19% annually. So it looks like Spectrum Pharmaceuticals is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Spectrum Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have forecasts for Spectrum Pharmaceuticals going out to 2025, and you can see them free on our platform here.

It is also worth noting that we have found 3 warning signs for Spectrum Pharmaceuticals that you need to take into consideration.

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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.