In This Article:
Market forces rained on the parade of Atara Biotherapeutics, Inc. (NASDAQ:ATRA) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After the downgrade, the eight analysts covering Atara Biotherapeutics are now predicting revenues of US$67m in 2022. If met, this would reflect a huge 178% improvement in sales compared to the last 12 months. Losses are forecast to narrow 4.6% to US$3.57 per share. However, before this estimates update, the consensus had been expecting revenues of US$62m and US$3.53 per share in losses. So it looks like there's been no major change in sentiment in this consensus update, although the analysts have made a small lift in revenue forecasts.
See our latest analysis for Atara Biotherapeutics
Analysts trimmed their valuations, with the average price target falling 8.9% to US$26.88, with the ongoing losses clearly weighing on sentiment despite the upgraded revenue estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Atara Biotherapeutics at US$67.00 per share, while the most bearish prices it at US$5.00. We would probably assign less value to the 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 possible to derive much meaning from 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. The analysts are definitely expecting Atara Biotherapeutics' growth to accelerate, with the forecast 290% annualised growth to the end of 2022 ranking favourably alongside historical growth of 96% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Atara Biotherapeutics to grow faster than the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Atara Biotherapeutics 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. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Atara Biotherapeutics going forwards.