Shareholders in Sutro Biopharma, Inc. (NASDAQ:STRO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that Sutro Biopharma will make substantially more sales than they'd previously expected. The market seems to be pricing in some improvement in the business too, with the stock up 6.8% over the past week, closing at US$7.74. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the latest upgrade, the nine analysts covering Sutro Biopharma provided consensus estimates of US$54m revenue in 2023, which would reflect a concerning 22% decline on its sales over the past 12 months. Losses are supposed to balloon 21% to US$2.59 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$48m and losses of US$2.80 per share in 2023. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to next year's revenue estimates, while at the same time reducing their loss estimates.
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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 18% by the end of 2023. This indicates a significant reduction from annual growth of 11% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sutro Biopharma is expected to lag the wider industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for next year, reflecting increased optimism around Sutro Biopharma's prospects. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Sutro Biopharma.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Sutro Biopharma going out to 2024, and you can see them free on our platform here..
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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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