The analysts covering Zymeworks Inc. (NASDAQ:ZYME) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. 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$16.77 reflecting a 22% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
After the downgrade, the seven analysts covering Zymeworks are now predicting revenues of US$101m in 2025. If met, this would reflect a substantial 62% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$120m in 2025. The consensus view seems to have become more pessimistic on Zymeworks, noting the measurable cut to revenue estimates in this update.
The consensus price target rose 9.0% to US$15.15, with the analysts clearly more optimistic about Zymeworks' prospects following this update.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Zymeworks' rate of growth is expected to accelerate meaningfully, with the forecast 47% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 38% p.a. 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 21% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Zymeworks to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for next year. They're also forecasting more rapid revenue growth 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. 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 Zymeworks after today.
Unanswered questions? At least one of Zymeworks' seven analysts has provided estimates out to 2026, which can be seen for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks with high insider ownership.
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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.
