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The analysts covering Idorsia Ltd (VTX:IDIA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the latest downgrade, the current consensus, from the ten analysts covering Idorsia, is for revenues of CHF114m in 2023, which would reflect an uneasy 9.7% reduction in Idorsia's sales over the past 12 months. Losses are presumed to reduce, shrinking 13% per share from last year to CHF3.97. Yet prior to the latest estimates, the analysts had been forecasting revenues of CHF144m and losses of CHF3.97 per share in 2023. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.
See our latest analysis for Idorsia
the analysts have cut their price target 6.3% to CHF9.60 per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation. 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. There are some variant perceptions on Idorsia, with the most bullish analyst valuing it at CHF30.00 and the most bearish at CHF5.50 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Idorsia's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Idorsia's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 18% to the end of 2023. This tops off a historical decline of 12% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 21% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Idorsia to suffer worse than the wider industry.