Newsflash: SQZ Biotechnologies Company (NYSE:SQZ) Analysts Have Been Trimming Their Revenue Forecasts

The analysts covering SQZ Biotechnologies Company (NYSE:SQZ) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the latest downgrade, SQZ Biotechnologies' three analysts currently expect revenues in 2021 to be US$21m, approximately in line with the last 12 months. Losses are predicted to fall substantially, shrinking 75% to US$2.38. However, before this estimates update, the consensus had been expecting revenues of US$25m and US$2.26 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 SQZ Biotechnologies

The consensus price target was broadly unchanged at US$36.67, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic SQZ Biotechnologies analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$35.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the SQZ Biotechnologies' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 1.9% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 4.4% over the last year. 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. It's pretty clear that SQZ Biotechnologies' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that SQZ Biotechnologies' revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of SQZ Biotechnologies going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple SQZ Biotechnologies analysts - going out to 2025, and you can see them 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.

If you’re looking to trade SQZ Biotechnologies, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.