The analysts covering AbCellera Biologics Inc. (NASDAQ:ABCL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. At US$31.75, shares are up 9.1% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the latest downgrade, the four analysts covering AbCellera Biologics provided consensus estimates of US$349m revenue in 2021, which would reflect a not inconsiderable 19% decline on its sales over the past 12 months. Statutory earnings per share are supposed to tumble 49% to US$0.56 in the same period. Previously, the analysts had been modelling revenues of US$488m and earnings per share (EPS) of US$0.93 in 2021. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for AbCellera Biologics

Analysts made no major changes to their price target of US$51.20, suggesting the downgrades are not expected to have a long-term impact on AbCellera Biologics' valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values AbCellera Biologics at US$55.00 per share, while the most bearish prices it at US$45.00. This is a very narrow spread of estimates, implying either that AbCellera Biologics is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. We would highlight that sales are expected to reverse, with a forecast 25% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 2,426% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.8% per year. It's pretty clear that AbCellera Biologics' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on AbCellera Biologics after the downgrade.