Analysts Have Just Cut Their ADC Therapeutics SA (NYSE:ADCT) Revenue Estimates By 28%

Today is shaping up negative for ADC Therapeutics SA (NYSE:ADCT) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Surprisingly the share price has been buoyant, rising 26% to US$2.40 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

After the downgrade, the consensus from ADC Therapeutics' seven analysts is for revenues of US$86m in 2023, which would reflect a stressful 53% decline in sales compared to the last year of performance. Per-share losses are expected to see a sharp uptick, reaching US$2.86. However, before this estimates update, the consensus had been expecting revenues of US$119m and US$2.78 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for ADC Therapeutics

The consensus price target fell 5.9% to US$10.67, implicitly signalling that lower earnings per share are a leading indicator for ADC Therapeutics' valuation. 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 ADC Therapeutics at US$20.00 per share, while the most bearish prices it at US$2.00. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the ADC Therapeutics' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 64% by the end of 2023. This indicates a significant reduction from annual growth of 119% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 19% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - ADC Therapeutics is expected to lag the wider 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 ADC Therapeutics. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that ADC Therapeutics' revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of ADC Therapeutics' future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of ADC Therapeutics going forwards.

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 ADC Therapeutics 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 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.