The analysts covering Scilex Holding Company (NASDAQ:SCLX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 26% to US$1.49 in the past 7 days. 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 downgrade, the current consensus from Scilex Holding's three analysts is for revenues of US$58m in 2024 which - if met - would reflect a substantial 24% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 47% to US$0.71. However, before this estimates update, the consensus had been expecting revenues of US$72m and US$0.47 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.

There was no major change to the consensus price target of US$5.33, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts.

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. It's clear from the latest estimates that Scilex Holding's rate of growth is expected to accelerate meaningfully, with the forecast 34% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 13% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Scilex Holding to grow faster than 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 Scilex Holding. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Scilex Holding.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Scilex Holding going out to 2026, and you can see them 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.

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