The Consensus EPS Estimates For Denali Therapeutics Inc. (NASDAQ:DNLI) Just Fell Dramatically

The latest analyst coverage could presage a bad day for Denali Therapeutics Inc. (NASDAQ:DNLI), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Shares are up 6.8% to US$18.31 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the current consensus, from the ten analysts covering Denali Therapeutics, is for revenues of US$48m in 2024, which would reflect a stressful 84% reduction in Denali Therapeutics' sales over the past 12 months. Losses are supposed to balloon 192% to US$2.81 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$66m and losses of US$2.61 per share in 2024. 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.

See our latest analysis for Denali Therapeutics

The consensus price target was broadly unchanged at US$38.67, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 91% by the end of 2024. This indicates a significant reduction from annual growth of 20% 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 19% annually for the foreseeable future. It's pretty clear that Denali Therapeutics' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Denali Therapeutics' revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Denali Therapeutics after the downgrade.

There might be good reason for analyst bearishness towards Denali Therapeutics, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 4 other warning signs we've identified.

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 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.