The latest analyst coverage could presage a bad day for Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), 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 the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Apellis Pharmaceuticals recently, with the stock price up a worthy 11% to US$50.20 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.
After the downgrade, the consensus from Apellis Pharmaceuticals’ 13 analysts is for revenues of US$27m in 2021, which would reflect a painful 89% decline in sales compared to the last year of performance. Losses are supposed to balloon 51% to US$7.07 per share. However, before this estimates update, the consensus had been expecting revenues of US$46m and US$6.43 per share in losses. So there’s been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
There was no major change to the consensus price target of US$69.73, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Apellis Pharmaceuticals, with the most bullish analyst valuing it at US$130 and the most bearish at US$39.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
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 Apellis Pharmaceuticals. 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 Apellis Pharmaceuticals.