It's been a mediocre week for CareDx, Inc (NASDAQ:CDNA) shareholders, with the stock dropping 19% to US$16.02 in the week since its latest third-quarter results. Revenues of US$79m came in 2.0% below estimates, but statutory losses were well contained with a per-share loss of US$0.32 being some 18% smaller than what the analysts were predicting. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on CareDx after the latest results.
After the latest results, the seven analysts covering CareDx are now predicting revenues of US$361.8m in 2023. If met, this would reflect a meaningful 14% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 23% to US$1.07. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$367.7m and losses of US$1.06 per share in 2023.
As a result, it's unexpected to see that the consensus price target fell 10% to US$35.83, with the analysts seemingly becoming more concerned about ongoing losses, despite making no major changes to their forecasts. 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. The most optimistic CareDx analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$32.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
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. It's pretty clear that there is an expectation that CareDx's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 38% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 15% per year. Factoring in the forecast slowdown in growth, it seems obvious that CareDx is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that CareDx's revenues are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for CareDx going out to 2024, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 2 warning signs for CareDx that you need to be mindful of.
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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.
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