Celebrations may be in order for Vir Biotechnology, Inc. (NASDAQ:VIR) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 7.5% over the past week, closing at US$38.32. Could this big upgrade push the stock even higher?
Following the upgrade, the current consensus from Vir Biotechnology’s seven analysts is for revenues of US$424m in 2021 which – if met – would reflect a huge 484% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 37% to US$1.99. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$284m and losses of US$2.65 per share in 2021. So there’s been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
Check out our latest analysis for Vir Biotechnology
Yet despite these upgrades, the analysts cut their price target 5.2% to US$70.43, implicitly signalling that the ongoing losses are likely to weigh negatively on Vir Biotechnology’s valuation. 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 Vir Biotechnology at US$135 per share, while the most bearish prices it at US$33.00. So we wouldn’t be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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. The analysts are definitely expecting Vir Biotechnology’s growth to accelerate, with the forecast 30x annualised growth to the end of 2021 ranking favourably alongside historical growth of 616% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 10% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Vir Biotechnology to grow faster than the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Vir Biotechnology is moving incrementally towards profitability. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. A lower price target is not intuitively what we would expect from a company whose business prospects are improving – at least judging by these forecasts – but if the underlying fundamentals are strong, Vir Biotechnology could be one for the watch list.
Analysts are definitely bullish on Vir Biotechnology, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including dilutive stock issuance over the past year. You can learn more, and discover the 3 other warning signs we’ve identified, for 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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