Forecast: Analysts Think Surface Oncology, Inc.'s (NASDAQ:SURF) Business Prospects Have Improved Drastically

Shareholders in Surface Oncology, Inc. (NASDAQ:SURF) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.

Following the latest upgrade, the current consensus, from the five analysts covering Surface Oncology, is for revenues of US$3.6m in 2023, which would reflect a sizeable 88% reduction in Surface Oncology's sales over the past 12 months. Losses are supposed to balloon 40% to US$1.54 per share. However, before this estimates update, the consensus had been expecting revenues of US$3.0m and US$1.90 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.

View our latest analysis for Surface Oncology

Yet despite these upgrades, the analysts cut their price target 52% to US$5.25, implicitly signalling that the ongoing losses are likely to weigh negatively on Surface Oncology'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. The most optimistic Surface Oncology analyst has a price target of US$6.00 per share, while the most pessimistic values it at US$3.00. 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 82% by the end of 2023. This indicates a significant reduction from annual growth of 8.8% 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 14% per year. It's pretty clear that Surface Oncology's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Surface Oncology is moving incrementally towards profitability. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. A lower price target is not intuitively what we would expect from a company whose business prospects are improving - at least judging by these forecasts - but if the underlying fundamentals are strong, Surface Oncology could be one for the watch list.

Analysts are definitely bullish on Surface Oncology, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including dilutive stock issuance over the past year. You can learn more, and discover the 4 other risks we've identified, for 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.

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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.