News Flash: Analysts Just Made A Dazzling Upgrade To Their Surface Oncology, Inc. (NASDAQ:SURF) Forecasts

Surface Oncology, Inc. (NASDAQ:SURF) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory 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.

After the upgrade, the consensus from Surface Oncology's five analysts is for revenues of US$30m in 2022, which would reflect a noticeable 2.1% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching US$1.27 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$23m and losses of US$1.51 per share in 2022. 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.

Check out our latest analysis for Surface Oncology

Yet despite these upgrades, the analysts cut their price target 9.6% to US$11.75, implicitly signalling that the ongoing losses are likely to weigh negatively on Surface Oncology's valuation. 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. The most optimistic Surface Oncology analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$10.00. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 2.8% by the end of 2022. This indicates a significant reduction from annual growth of 25% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 12% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Surface Oncology is expected to lag the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Surface Oncology 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.

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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.