Things Look Grim For BIOLASE, Inc. (NASDAQ:BIOL) After Today's Downgrade
Market forces rained on the parade of BIOLASE, Inc. (NASDAQ:BIOL) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the consensus from three analysts covering BIOLASE is for revenues of US$31m in 2020, implying an uncomfortable 18% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 38% to US$0.47. However, before this estimates update, the consensus had been expecting revenues of US$45m and US$0.31 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
See our latest analysis for BIOLASE
The consensus price target was broadly unchanged at US$2.42, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on BIOLASE, with the most bullish analyst valuing it at US$3.50 and the most bearish at US$1.75 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the BIOLASE's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that BIOLASE'sdecline is expected to accelerate, with revenues forecast to fall 18% next year, topping off a historical decline of 3.0% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 7.5% next year. So while a broad number of companies are forecast to decline, unfortunately BIOLASE is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 BIOLASE after the downgrade.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with BIOLASE, including a short cash runway. For more information, you can click here to discover this and the 4 other concerns we've identified.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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