Yahoo Finance Earnings Beat: Alector, Inc. (NASDAQ:ALEC) Just Beat Analyst Forecasts, And Analysts Have Been Lifting Their Forecasts
It's been a mediocre week for Alector, Inc. (NASDAQ:ALEC) shareholders, with the stock dropping 16% to US$23.45 in the week since its latest annual results. Alector reported revenues of US$21m, in line with expectations, but it unfortunately also reported (statutory) losses of US$1.71 per share, which were slightly larger than expected. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Alector after the latest results.
View our latest analysis for Alector
Following the latest results, Alector's three analysts are now forecasting revenues of US$42.5m in 2020. This would be a huge 100% improvement in sales compared to the last 12 months. Losses are expected to increase slightly, to US$1.75 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$31.3m and losses of US$1.78 per share in 2020. So there's definitely been a change in sentiment in this update, with the analysts upgrading this year's revenue estimates, while at the same time holding losses per share steady.
There were no major changes to the US$34.33 consensus price target despite the higher revenue estimates, with the analysts seeming to believe that ongoing losses have a larger impact on the valuation than growing sales. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Alector analyst has a price target of US$44.00 per share, while the most pessimistic values it at US$27.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Alector's past performance and to peers in the same industry. It's clear from the latest estimates that Alector's rate of growth is expected to accelerate meaningfully, with the forecast 100% revenue growth noticeably faster than its historical growth of 55%p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Alector is expected to grow much faster than its industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at US$34.33, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Alector. Long-term earnings power is much more important than next year's profits. We have forecasts for Alector 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 3 warning signs for Alector (1 makes us a bit uncomfortable!) that you need to be mindful of.
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