Vir Biotechnology, Inc. (NASDAQ:VIR) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's forecasts. The revenue forecast for next year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline.
After this upgrade, Vir Biotechnology's seven analysts are now forecasting revenues of US$130m in 2021. This would be a substantial 72% improvement in sales compared to the last 12 months. Losses are expected to increase substantially, hitting US$2.75 per share. However, before this estimates update, the consensus had been expecting revenues of US$114m and US$2.90 per share in losses. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to next year's revenue estimates, while at the same time reducing their loss estimates.
It will come as no surprise to learn that the analysts have increased their price target for Vir Biotechnology 6.5% to US$58.43 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Vir Biotechnology at US$125 per share, while the most bearish prices it at US$24.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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 Vir Biotechnology's revenue growth is expected to slow, with forecast 72% increase next year well below the historical 98% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 20% next year. Even after the forecast slowdown in growth, it seems obvious that Vir Biotechnology is also expected to grow faster than the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Vir Biotechnology is moving incrementally towards profitability. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Vir Biotechnology.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Vir Biotechnology analysts - going out to 2025, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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