It's been a sad week for 23andMe Holding Co. (NASDAQ:ME), who've watched their investment drop 13% to US$0.63 in the week since the company reported its third-quarter result. It was a weak result overall, with 23andMe Holding reporting US$45m in revenues, which was 21% less than what the analysts had expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, 23andMe Holding's dual analysts are now forecasting revenues of US$265.0m in 2025. This would be a credible 6.9% improvement in revenue compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 45% to US$0.59. Before this latest report, the consensus had been expecting revenues of US$275.2m and US$0.72 per share in losses. While the revenue estimates fell, sentiment seems to have improved, with the analysts making a favorable reduction in losses per share in particular.
The consensus price target fell 27% to US$1.43, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses.
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. For example, we noticed that 23andMe Holding's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 5.5% growth to the end of 2025 on an annualised basis. That is well above its historical decline of 6.8% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 6.3% annually. So while 23andMe Holding's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. Even so, long term profitability is more important for the value creation process. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of 23andMe Holding's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on 23andMe Holding. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2026, which can be seen for free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for 23andMe Holding (1 shouldn't be ignored) you should be aware of.
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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.