The latest analyst coverage could presage a bad day for Fulgent Genetics, Inc. (NASDAQ:FLGT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At US$37.02, shares are up 6.7% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, the two analysts covering Fulgent Genetics provided consensus estimates of US$262m revenue in 2023, which would reflect a concerning 67% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$349m of revenue in 2023. The consensus view seems to have become more pessimistic on Fulgent Genetics, noting the pretty serious reduction to revenue estimates in this update.
The consensus price target fell 15% to US$57.50, with the analysts clearly less optimistic about Fulgent Genetics' valuation following this update. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Fulgent Genetics at US$65.00 per share, while the most bearish prices it at US$50.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 59% by the end of 2023. This indicates a significant reduction from annual growth of 68% 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 7.6% per year. It's pretty clear that Fulgent Genetics' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for next year. They're also anticipating slower revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Fulgent Genetics after today.
There might be good reason for analyst bearishness towards Fulgent Genetics, like its declining profit margins. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.
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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