Yahoo Finance Prothena Corporation plc (NASDAQ:PRTA) Analysts Just Trimmed Their Revenue Forecasts By 29%
One thing we could say about the analysts on Prothena Corporation plc (NASDAQ:PRTA) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Surprisingly the share price has been buoyant, rising 44% to US$75.76 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the latest downgrade, the current consensus, from the ten analysts covering Prothena, is for revenues of US$17m in 2023, which would reflect a substantial 69% reduction in Prothena's sales over the past 12 months. Per-share losses are expected to explode, reaching US$4.07 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$24m and losses of US$3.80 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
See our latest analysis for Prothena
Analysts lifted their price target 7.6% to US$92.10, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Prothena analyst has a price target of US$120 per share, while the most pessimistic values it at US$60.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Prothena's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 79% by the end of 2023. This indicates a significant reduction from annual growth of 56% 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 18% annually for the foreseeable future. It's pretty clear that Prothena's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Prothena. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Prothena's revenues are expected to grow slower than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Prothena going forwards.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Prothena analysts - going out to 2025, and you can see them 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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