These Analysts Think Mirati Therapeutics, Inc.'s (NASDAQ:MRTX) Sales Are Under Threat

Simply Wall St
·3 min read

The analysts covering Mirati Therapeutics, Inc. (NASDAQ:MRTX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the 15 analysts covering Mirati Therapeutics are now predicting revenues of US$96m in 2023. If met, this would reflect a huge improvement in sales compared to the last 12 months. Losses are expected to increase slightly, to US$13.21 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$126m and losses of US$12.81 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Mirati Therapeutics

earnings-and-revenue-growth
earnings-and-revenue-growth

The consensus price target fell 21% to US$91.40, implicitly signalling that lower earnings per share are a leading indicator for Mirati Therapeutics' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Mirati Therapeutics, with the most bullish analyst valuing it at US$188 and the most bearish at US$61.00 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. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Mirati Therapeutics' past performance and to peers in the same industry. The analysts are definitely expecting Mirati Therapeutics' growth to accelerate, with the forecast 4x annualised growth to the end of 2023 ranking favourably alongside historical growth of 57% per annum 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 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Mirati Therapeutics to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Mirati Therapeutics' future valuation. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Mirati Therapeutics going forwards.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Mirati Therapeutics going out to 2024, 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 that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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