Seattle Genetics, Inc. (NASDAQ:SGEN) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year’s statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investors have been pretty optimistic on Seattle Genetics too, with the stock up 18% to US$175 over the past week. We’ll be curious to see if these new estimates convince the market to lift the stock price higher still.
Following the upgrade, the latest consensus from Seattle Genetics’ 19 analysts is for revenues of US$1.4b in 2020, which would reflect a huge 35% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 11% from last year to US$1.33. Yet before this consensus update, the analysts had been forecasting revenues of US$1.2b and losses of US$2.06 per share in 2020. So there’s been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
There was no major change to the consensus price target of US$184, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Seattle Genetics at US$252 per share, while the most bearish prices it at US$138. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It’s clear from the latest estimates that Seattle Genetics’ rate of growth is expected to accelerate meaningfully, with the forecast 35% revenue growth noticeably faster than its historical growth of 24% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 20% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Seattle Genetics is expected to grow much faster than its industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Seattle Genetics is moving incrementally towards profitability. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive – assuming these forecasts are met! So Seattle Genetics could be a good candidate for more research.
It’s great to see the analysts upgrading their estimates, but the biggest highlight to us is that the business is expected to become profitable in the foreseeable future. For more information, you can click through to our free platform to learn more about these forecasts.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks 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.