Today is shaping up negative for HOOKIPA Pharma Inc. (NASDAQ:HOOK) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Bidders are definitely seeing a different story, with the stock price of US$1.57 reflecting a 11% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the latest downgrade, the seven analysts covering HOOKIPA Pharma provided consensus estimates of US$13m revenue in 2022, which would reflect a not inconsiderable 8.9% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$1.77 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$22m and losses of US$1.71 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.
The consensus price target fell 14% to US$7.29, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values HOOKIPA Pharma at US$16.00 per share, while the most bearish prices it at US$2.00. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.
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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 12% by the end of 2022. This indicates a significant reduction from annual growth of 17% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 12% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - HOOKIPA Pharma 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 HOOKIPA Pharma. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 HOOKIPA Pharma's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on HOOKIPA Pharma after today.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with HOOKIPA Pharma, including major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 3 other warning signs we've identified.
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