Today is shaping up negative for SomaLogic, Inc. (NASDAQ:SLGC) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. At US$2.55, shares are up 9.4% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

After the downgrade, the consensus from SomaLogic's four analysts is for revenues of US$82m in 2023, which would reflect a definite 17% decline in sales compared to the last year of performance. Per-share losses are expected to see a sharp uptick, reaching US$0.69. However, before this estimates update, the consensus had been expecting revenues of US$95m and US$0.59 per share in losses. 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 expecting losses per share to increase.

See our latest analysis for SomaLogic

The consensus price target fell 13% to US$5.63, implicitly signalling that lower earnings per share are a leading indicator for SomaLogic'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. There are some variant perceptions on SomaLogic, with the most bullish analyst valuing it at US$7.00 and the most bearish at US$3.50 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 17% by the end of 2023. This indicates a significant reduction from annual growth of 28% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - SomaLogic is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at SomaLogic. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that SomaLogic's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of SomaLogic.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple SomaLogic analysts - going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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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