Time To Worry? Analysts Just Downgraded Their SQZ Biotechnologies Company (NYSE:SQZ) Outlook

Market forces rained on the parade of SQZ Biotechnologies Company (NYSE:SQZ) shareholders today, when the analysts downgraded their 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 downgrade, the most recent consensus for SQZ Biotechnologies from its five analysts is for revenues of US$25m in 2022 which, if met, would be an okay 3.2% increase on its sales over the past 12 months. Per-share losses are expected to creep up to US$2.81. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$29m and losses of US$2.72 per share in 2022. 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.

See our latest analysis for SQZ Biotechnologies

The consensus price target was broadly unchanged at US$29.60, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 SQZ Biotechnologies at US$42.00 per share, while the most bearish prices it at US$16.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. We would highlight that SQZ Biotechnologies' revenue growth is expected to slow, with the forecast 4.2% annualised growth rate until the end of 2022 being well below the historical 22% growth over the last year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than SQZ Biotechnologies.

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 SQZ Biotechnologies. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that SQZ Biotechnologies' revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on SQZ Biotechnologies after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for SQZ Biotechnologies going out to 2024, 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.

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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.