One thing we could say about the analysts on PharmaCielo Ltd. (CVE:PCLO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Surprisingly the share price has been buoyant, rising 40% to CA$1.02 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the downgrade, the current consensus from PharmaCielo's two analysts is for revenues of CA$14m in 2020 which - if met - would reflect a huge increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing CA$26m of revenue in 2020. The consensus view seems to have become more pessimistic on PharmaCielo, noting the pretty serious reduction to revenue estimates in this update.
Notably, the analysts have cut their price target 29% to CA$3.50, suggesting concerns around PharmaCielo's 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. There are some variant perceptions on PharmaCielo, with the most bullish analyst valuing it at CA$4.00 and the most bearish at CA$3.00 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
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 PharmaCielo's business, like dilutive stock issuance over 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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