The analysts covering Schrödinger, Inc. (NASDAQ:SDGR) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory 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 this downgrade, Schrödinger's ten analysts are forecasting 2024 revenues to be US$214m, approximately in line with the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$2.65 per share in 2024. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$261m and losses of US$2.25 per share in 2024. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 11% to US$37.70, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.
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. We would highlight that sales are expected to reverse, with a forecast 1.0% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 24% 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 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Schrödinger is expected to lag 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 Schrödinger. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Schrödinger's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Schrödinger analysts - going out to 2026, 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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