Shareholders in Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. 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 4.6% over the past week, closing at US$102. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the latest upgrade, the current consensus, from the five analysts covering Ligand Pharmaceuticals, is for revenues of US$179m in 2022, which would reflect a disturbing 25% reduction in Ligand Pharmaceuticals' sales over the past 12 months. Per-share losses are expected to explode, reaching US$2.00 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$162m and losses of US$2.58 per share in 2022. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 44% by the end of 2022. This indicates a significant reduction from annual growth of 9.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 15% annually for the foreseeable future. It's pretty clear that Ligand Pharmaceuticals' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Ligand Pharmaceuticals' prospects. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. With a serious upgrade to expectations, it might be time to take another look at Ligand Pharmaceuticals.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Ligand Pharmaceuticals analysts - 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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