The latest analyst coverage could presage a bad day for Akeso, Inc. (HKG:9926), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Investors however, have been notably more optimistic about Akeso recently, with the stock price up an impressive 19% to HK$25.65 in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
After this downgrade, Akeso's twelve analysts are now forecasting revenues of CN¥1.0b in 2022. This would be a major 287% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 14% from last year to CN¥1.31. Yet before this consensus update, the analysts had been forecasting revenues of CN¥1.1b and losses of CN¥1.16 per share in 2022. 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 AkesoSEHK:9926 Earnings and Revenue Growth August 28th 2022
The consensus price target fell 8.0% to CN¥30.14, implicitly signalling that lower earnings per share are a leading indicator for Akeso's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Akeso analyst has a price target of CN¥51.62 per share, while the most pessimistic values it at CN¥27.81. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Akeso's growth to accelerate, with the forecast 14x annualised growth to the end of 2022 ranking favourably alongside historical growth of 102% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 41% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Akeso to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Akeso.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Akeso analysts - going out to 2024, 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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