Results: Zentalis Pharmaceuticals, Inc. Confounded Analyst Expectations With A Surprise Profit

Shareholders of Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) will be pleased this week, given that the stock price is up 12% to US$12.43 following its latest quarterly results. Revenues of 248% beat expectations by US$41m and was sufficient to generate a statutory profit of US$0.14 - a pleasant surprise given that the analysts were forecasting a loss! The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Zentalis Pharmaceuticals after the latest results.

View our latest analysis for Zentalis Pharmaceuticals

Following the recent earnings report, the consensus from nine analysts covering Zentalis Pharmaceuticals is for revenues of US$7.00m in 2024. This implies a stressful 83% decline in revenue compared to the last 12 months. Per-share losses are predicted to creep up to US$3.19. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$7.00m and losses of US$3.64 per share in 2024. Although the revenue estimates have not really changed Zentalis Pharmaceuticals'future looks a little different to the past, with a notable improvement in the loss per share forecasts in particular.

Even with the lower forecast losses, the analysts lowered their valuations, with the average price target falling 5.1% to US$33.80. It looks likethe analysts have become less optimistic about the overall business. 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. Currently, the most bullish analyst values Zentalis Pharmaceuticals at US$50.00 per share, while the most bearish prices it at US$15.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 90% by the end of 2024. This indicates a significant reduction from annual growth of 172% 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 18% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Zentalis Pharmaceuticals is expected to lag the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Zentalis Pharmaceuticals going out to 2026, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 2 warning signs for Zentalis Pharmaceuticals that you should be aware of.

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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.