Need To Know: The Consensus Just Cut Its Molecular Templates, Inc. (NASDAQ:MTEM) Estimates For 2022

The analysts covering Molecular Templates, Inc. (NASDAQ:MTEM) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At US$0.91, shares are up 8.6% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the consensus from six analysts covering Molecular Templates is for revenues of US$26m in 2022, implying a substantial 23% decline in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$1.46. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$33m and losses of US$1.42 per share in 2022. 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.

Check out our latest analysis for Molecular Templates

The consensus price target fell 11% to US$8.33, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Molecular Templates at US$18.00 per share, while the most bearish prices it at US$1.50. 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.

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. We would highlight that sales are expected to reverse, with a forecast 40% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 37% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 15% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Molecular Templates is expected to lag 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 Molecular Templates. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Molecular Templates' revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Molecular Templates after today.

That said, the analysts might have good reason to be negative on Molecular Templates, given a short cash runway. For more information, you can click here to discover this and the 3 other risks 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.

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