Market forces rained on the parade of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the current consensus from ACADIA Pharmaceuticals' 19 analysts is for revenues of US$554m in 2021 which - if met - would reflect a sizeable 26% increase on its sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching US$2.11. Yet before this consensus update, the analysts had been forecasting revenues of US$638m and losses of US$1.70 per share in 2021. 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.
The consensus price target fell 28% to US$45.06, implicitly signalling that lower earnings per share are a leading indicator for ACADIA Pharmaceuticals' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values ACADIA Pharmaceuticals at US$73.00 per share, while the most bearish prices it at US$42.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that ACADIA Pharmaceuticals' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 26% growth on an annualised basis. This is compared to a historical growth rate of 52% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 18% per year. Even after the forecast slowdown in growth, it seems obvious that ACADIA Pharmaceuticals is also expected to grow faster 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 ACADIA Pharmaceuticals. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of ACADIA Pharmaceuticals.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for ACADIA Pharmaceuticals going out to 2025, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
This article by Simply Wall St is general in nature. 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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