Analysts Just Shaved Their Vir Biotechnology, Inc. (NASDAQ:VIR) Forecasts Dramatically

The analysts covering Vir Biotechnology, Inc. (NASDAQ:VIR) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the six analysts covering Vir Biotechnology, is for revenues of US$215m in 2023, which would reflect a substantial 87% reduction in Vir Biotechnology's sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$3.40 per share in 2023. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$379m and losses of US$2.15 per share in 2023. 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.

Check out our latest analysis for Vir Biotechnology

The consensus price target was broadly unchanged at US$52.25, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Vir Biotechnology, with the most bullish analyst valuing it at US$125 and the most bearish at US$25.00 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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 sales are expected to reverse, with a forecast 87% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 84% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Vir Biotechnology is expected to lag 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Vir Biotechnology's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Vir Biotechnology after the downgrade.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Vir Biotechnology's business, like recent substantial insider selling. For more information, you can click here to discover this and the 2 other concerns we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.