The analysts covering Inovio Pharmaceuticals, Inc. (NASDAQ:INO) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the latest consensus from Inovio Pharmaceuticals' eight analysts is for revenues of US$6.2m in 2020, which would reflect a huge 127% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 19% from last year to US$1.49. Yet before this consensus update, the analysts had been forecasting revenues of US$9.4m and losses of US$1.47 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 28% to US$13.71 per share, signalling that the declining revenue and ongoing losses are contributing to the lower 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. Currently, the most bullish analyst values Inovio Pharmaceuticals at US$25.00 per share, while the most bearish prices it at US$8.00. 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 think this business will perform. 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 Inovio Pharmaceuticals' past performance and to peers in the same industry. For example, we noticed that Inovio Pharmaceuticals' rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 127%, well above its historical decline of 22% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 20% next year. Not only are Inovio Pharmaceuticals' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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 Inovio Pharmaceuticals' future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Inovio Pharmaceuticals going forwards.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Inovio Pharmaceuticals' business, like major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 3 other flags we've identified.
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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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