Analysts Are Upgrading Sutro Biopharma, Inc. (NASDAQ:STRO) After Its Latest Results

Sutro Biopharma, Inc. (NASDAQ:STRO) defied analyst predictions to release its quarterly results, which were ahead of market expectations. Revenue crushed expectations at US$26m, beating expectations by 22%. Sutro Biopharma reported a statutory loss of US$0.59 per share, which - although not amazing - was much smaller than the analysts predicted. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Sutro Biopharma

Taking into account the latest results, the current consensus, from the eleven analysts covering Sutro Biopharma, is for revenues of US$62.1m in 2024. This implies a painful 63% reduction in Sutro Biopharma's revenue over the past 12 months. Per-share losses are expected to explode, reaching US$2.99 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$56.2m and losses of US$3.43 per share in 2024. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

Despite these upgrades,the analysts have not made any major changes to their price target of US$12.00, implying that their latest estimates don't have a long term impact on what they think the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Sutro Biopharma analyst has a price target of US$20.00 per share, while the most pessimistic values it at US$5.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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. We would highlight that revenue is expected to reverse, with a forecast 87% annualised decline to the end of 2024. That is a notable change from historical growth of 26% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 23% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sutro Biopharma is expected to lag the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also upgraded their revenue estimates, although our data indicates it is expected to perform worse than the wider industry. The consensus price target held steady at US$12.00, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Sutro Biopharma. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Sutro Biopharma analysts - going out to 2026, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Sutro Biopharma that you should be aware of.

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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.