The analysts covering MannKind Corporation (NASDAQ:MNKD) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 13% to US$2.28 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
After this downgrade, MannKind’s five analysts are now forecasting revenues of US$88m in 2021. This would be a huge 40% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 47% to US$0.11. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$102m and losses of US$0.084 per share in 2021. Ergo, there’s been a clear change in sentiment, with the analysts administering a notable cut to next year’s revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target was broadly unchanged at US$3.10, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic MannKind analyst has a price target of US$4.00 per share, while the most pessimistic values it at US$2.50. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that MannKind’s revenue growth is expected to slow, with forecast 40% increase next year well below the historical 55% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 20% next year. Even after the forecast slowdown in growth, it seems obvious that MannKind is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at MannKind. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We’re also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn’t blame investors for being more cautious on MannKind after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple MannKind 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 downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
This article by Simply Wall St is general in nature. 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.