Yahoo Finance The Consensus EPS Estimates For Gritstone bio, Inc. (NASDAQ:GRTS) Just Fell Dramatically
The latest analyst coverage could presage a bad day for Gritstone bio, Inc. (NASDAQ:GRTS), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from four analysts covering Gritstone bio is for revenues of US$9.1m in 2023, implying a concerning 40% decline in sales compared to the last 12 months. Per-share losses are expected to creep up to US$1.47. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$19m and losses of US$1.33 per share in 2023. 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 expecting losses per share to increase.
Check out our latest analysis for Gritstone bio
There was no major change to the consensus price target of US$8.64, signalling that the business is performing roughly in line with expectations, despite lower earnings per share 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 Gritstone bio analyst has a price target of US$20.00 per share, while the most pessimistic values it at US$2.00. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 49% by the end of 2023. This indicates a significant reduction from annual growth of 46% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 19% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Gritstone bio is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Gritstone bio's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Gritstone bio.
There might be good reason for analyst bearishness towards Gritstone bio, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other warning signs we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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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