Things Look Grim For XOMA Corporation (NASDAQ:XOMA) After Today's Downgrade

Market forces rained on the parade of XOMA Corporation (NASDAQ:XOMA) shareholders today, when the analysts downgraded their 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 four analysts covering XOMA, is for revenues of US$10.0m in 2021, which would reflect a sizeable 66% reduction in XOMA'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$1.04 per share in 2021. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$12m and losses of US$0.83 per share in 2021. 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 XOMA

Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it's the idea that XOMA's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 88% to the end of 2021. This tops off a historical decline of 16% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 10% per year. So while a broad number of companies are forecast to grow, unfortunately XOMA is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at XOMA. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that XOMA's revenues are expected to grow slower than the wider market. Given the serious cut to this year's outlook, it's clear that analysts have turned more bearish on XOMA, and we wouldn't blame shareholders for feeling a little more cautious themselves.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with XOMA's financials, such as concerns around earnings quality. Learn more, and discover the 3 other flags 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.
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