Today is shaping up negative for Sangamo Therapeutics, Inc. (NASDAQ:SGMO) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Bidders are definitely seeing a different story, with the stock price of US$0.97 reflecting a 24% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the latest downgrade, the current consensus, from the eight analysts covering Sangamo Therapeutics, is for revenues of US$37m in 2024, which would reflect a sizeable 79% reduction in Sangamo Therapeutics' sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 65% to US$0.50. However, before this estimates update, the consensus had been expecting revenues of US$43m and US$0.48 per share in losses. 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.
Analysts lifted their price target 11% to US$3.50, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 79% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 17% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 18% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sangamo Therapeutics 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 Sangamo Therapeutics. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Sangamo Therapeutics after today.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Sangamo Therapeutics' financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other warning signs we've identified.
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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.