Investors in Sage Therapeutics, Inc. (NASDAQ:SAGE) had a good week, as its shares rose 2.7% to close at US$13.69 following the release of its quarterly results. Revenues were 52% better than analyst models forecast, at US$7.9m. Perhaps unsurprisingly, statutory losses were also slightly larger than expected, at US$1.80 per share, reflecting the higher costs which were likely incurred in generating that revenue. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
View our latest analysis for Sage Therapeutics
After the latest results, the consensus from Sage Therapeutics’ 21 analysts is for revenues of US$42.7m in 2024, which would reflect a painful 53% decline in revenue compared to the last year of performance. Losses are predicted to fall substantially, shrinking 21% to US$6.58. Before this latest report, the consensus had been expecting revenues of US$32.5m and US$6.37 per share in losses. So there’s been quite a change-up of views after the recent consensus updates, with the analysts significantly increasing their revenue forecasts while also expecting losses per share to increase. It looks like the top line growth will not be achieved without incremental costs.
It will come as no surprise that expanding losses caused the consensus price target to fall 8.9% to US$22.22with the analysts implicitly ranking ongoing losses as a greater concern than growing revenues. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Sage Therapeutics at US$70.00 per share, while the most bearish prices it at US$14.00. We would probably assign less value to the analyst 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 the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One more thing stood out to us about these estimates, and it’s the idea that Sage Therapeutics’ decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 64% to the end of 2024. This tops off a historical decline of 13% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 18% annually. So while a broad number of companies are forecast to grow, unfortunately Sage Therapeutics is expected to see its revenue affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also upgraded their revenue estimates for next year, even though it is expected to grow slower than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Sage Therapeutics’ future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple Sage Therapeutics analysts – going out to 2026, and you can see them free on our platform here.
Don’t forget that there may still be risks. For instance, we’ve identified 1 warning sign for Sage Therapeutics that you should be aware of.
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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.
