Market forces rained on the parade of PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS) 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. At US$4.73, shares are up 7.7% in the past 7 days. 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.
Following the downgrade, the consensus from five analysts covering PhaseBio Pharmaceuticals is for revenues of US$905k in 2020, implying a painful 55% decline in sales compared to the last 12 months. Losses are supposed to balloon 27% to US$2.08 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$1.0m and losses of US$2.10 per share in 2020. 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 making no real change to the loss per share numbers.
the analysts have cut their price target 6.0% to US$15.67 per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on PhaseBio Pharmaceuticals, with the most bullish analyst valuing it at US$18.00 and the most bearish at US$11.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 55%, a significant reduction from annual growth of 53% 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 25% annually for the foreseeable future. It's pretty clear that PhaseBio Pharmaceuticals' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 PhaseBio Pharmaceuticals' future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on PhaseBio Pharmaceuticals after today.
There might be good reason for analyst bearishness towards PhaseBio Pharmaceuticals, like a short cash runway. Learn more, and discover the 3 other flags we've identified, for free on our platform here.
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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.
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