The analysts might have been a bit too bullish on Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), given that the company fell short of expectations when it released its first-quarter results last week. Revenues missed expectations somewhat, coming in at US$30m, but statutory earnings fell catastrophically short, with a loss of US$0.05 some 74% larger than what the analysts had predicted. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from Rigel Pharmaceuticals' six analysts is for revenues of US$149.7m in 2024. This reflects a substantial 26% improvement in revenue compared to the last 12 months. Losses are predicted to fall substantially, shrinking 52% to US$0.055. Before this latest report, the consensus had been expecting revenues of US$149.5m and US$0.088 per share in losses. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading their numbers and making a considerable decrease in losses per share in particular.
These new estimates led to the consensus price target rising 13% to US$5.15, with lower forecast losses suggesting things could be looking up for Rigel Pharmaceuticals. 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. Currently, the most bullish analyst values Rigel Pharmaceuticals at US$15.00 per share, while the most bearish prices it at US$1.75. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Rigel Pharmaceuticals' rate of growth is expected to accelerate meaningfully, with the forecast 35% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 9.0% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 18% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Rigel Pharmaceuticals is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Rigel Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have forecasts for Rigel Pharmaceuticals going out to 2026, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for Rigel Pharmaceuticals that we have uncovered.
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