Solid Biosciences Inc. (NASDAQ:SLDB) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 5.5% to US$0.80 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
After the upgrade, the consensus from Solid Biosciences' four analysts is for revenues of US$11m in 2022, which would reflect a sizeable 24% decline in sales compared to the last year of performance. Per-share losses are expected to see a sharp uptick, reaching US$0.88. Yet before this consensus update, the analysts had been forecasting revenues of US$8.8m and losses of US$0.80 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts lifting this year's revenue estimates, while at the same time increasing their loss per share forecasts to reflect the cost of achieving this growth.
The consensus price target stayed unchanged at US$5.40, seeming to suggest that higher forecast losses are not expected to have a long term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Solid Biosciences, with the most bullish analyst valuing it at US$12.00 and the most bearish at US$2.00 per share. 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. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 42% by the end of 2022. This indicates a significant reduction from annual growth of 92% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 15% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Solid Biosciences is expected to lag the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Solid Biosciences. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Solid Biosciences.
Analysts are definitely bullish on Solid Biosciences, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including dilutive stock issuance over the past year. For more information, you can click through to our platform to learn more about this and the 3 other flags we've identified .
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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