The analysts might have been a bit too bullish on Editas Medicine, Inc. (NASDAQ:EDIT), given that the company fell short of expectations when it released its second-quarter results last week. Earnings missed the mark badly, with revenues of US$513k falling 88% short of expectations. Losses correspondingly increased, with a US$0.82 per-share statutory loss some 19% larger than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Following the recent earnings report, the consensus from 17 analysts covering Editas Medicine is for revenues of US$24.9m in 2024. This implies a stressful 63% decline in revenue compared to the last 12 months. Losses are forecast to balloon 24% to US$2.92 per share. Before this earnings announcement, the analysts had been modelling revenues of US$27.6m and losses of US$2.69 per share in 2024. So it's pretty clear consensus is more negative on Editas Medicine after the new consensus numbers; while the analysts trimmed their revenue estimates, they also administered a modest increase to per-share loss expectations.

The average price target fell 5.1% to US$13.53, implicitly signalling that lower earnings per share are a leading indicator for Editas Medicine's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Editas Medicine analyst has a price target of US$27.00 per share, while the most pessimistic values it at US$7.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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 revenue is expected to slow, with a forecast annualised decline of 86% by the end of 2024. This indicates a significant reduction from annual growth of 4.5% 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 23% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Editas Medicine is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Editas Medicine going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 3 warning signs for Editas Medicine that we have uncovered.

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