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It's shaping up to be a tough period for Akebia Therapeutics, Inc. (NASDAQ:AKBA), which a week ago released some disappointing third-quarter results that could have a notable impact on how the market views the stock. Statutory earnings fell substantially short of expectations, with revenues of US$60m missing forecasts by 33%. Losses exploded, with a per-share loss of US$0.42 some 45% below prior forecasts. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the recent earnings report, the consensus from eight analysts covering Akebia Therapeutics is for revenues of US$240.2m in 2021, implying a stressful 22% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 69% to US$0.92. Before this latest report, the consensus had been expecting revenues of US$276.6m and US$0.83 per share in losses. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.
The average price target was broadly unchanged at US$6.71, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 Akebia Therapeutics, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$3.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 22%, a significant reduction from annual growth of 28% 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 20% next year. It's pretty clear that Akebia Therapeutics' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$6.71, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Akebia Therapeutics analysts - going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Akebia Therapeutics that you should be aware of.
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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