What Does The Future Hold For Pacific Biosciences of California, Inc. (NASDAQ:PACB)? These Analysts Have Been Cutting Their Estimates

Market forces rained on the parade of Pacific Biosciences of California, Inc. (NASDAQ:PACB) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Investors however, have been notably more optimistic about Pacific Biosciences of California recently, with the stock price up an astounding 39% to US$6.06 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.

Following the latest downgrade, Pacific Biosciences of California's six analysts currently expect revenues in 2022 to be US$142m, approximately in line with the last 12 months. Per-share losses are expected to explode, reaching US$1.36 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$162m and losses of US$1.36 per share in 2022. 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 making no real change to the loss per share numbers.

See our latest analysis for Pacific Biosciences of California

the analysts have cut their price target 37% to US$10.00 per share, signalling that the declining revenue and ongoing losses are contributing to the lower 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. Currently, the most bullish analyst values Pacific Biosciences of California at US$14.00 per share, while the most bearish prices it at US$6.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Pacific Biosciences of California's revenue growth is expected to slow, with the forecast 3.2% annualised growth rate until the end of 2022 being well below the historical 8.2% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.0% annually. Factoring in the forecast slowdown in growth, it seems obvious that Pacific Biosciences of California is also expected to grow slower than other industry participants.

The Bottom Line

Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Pacific Biosciences of California going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Pacific Biosciences of California 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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