Time To Worry? Analysts Are Downgrading Their Zymeworks Inc. (NASDAQ:ZYME) Outlook

Market forces rained on the parade of Zymeworks Inc. (NASDAQ:ZYME) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Shares are up 6.0% to US$13.70 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

After the downgrade, the seven analysts covering Zymeworks are now predicting revenues of US$94m in 2025. If met, this would reflect a sizeable 50% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 16% per share from last year to US$1.36. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$120m and losses of US$0.97 per share in 2025. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Zymeworks

The consensus price target lifted 6.3% to US$14.78, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The period to the end of 2025 brings more of the same, according to the analysts, with revenue forecast to display 38% growth on an annualised basis. That is in line with its 44% annual growth 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 revenues grow 21% per year. So although Zymeworks is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The rising price target is a puzzle, but still - with a serious cut to next year's outlook, we wouldn't be surprised if investors were a bit wary of Zymeworks.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Zymeworks analysts - going out to 2026, 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 downgrading their estimates. So you may also wish to search this free list of stocks with high insider ownership.

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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.