One thing we could say about the analysts on Epizyme, Inc. (NASDAQ:EPZM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the latest consensus from Epizyme's six analysts is for revenues of US$49m in 2021, which would reflect a substantial 212% improvement in sales compared to the last 12 months. Losses are forecast to hold steady at around US$2.26. Yet before this consensus update, the analysts had been forecasting revenues of US$75m and losses of US$2.16 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Epizyme

The consensus price target fell 15% to US$19.63, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Epizyme analyst has a price target of US$36.00 per share, while the most pessimistic values it at US$10.00. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. The analysts are definitely expecting Epizyme's growth to accelerate, with the forecast 212% annualised growth to the end of 2021 ranking favourably alongside historical growth of 26% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 19% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Epizyme is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will 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. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Epizyme after today.