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Earnings Release: Here's Why Analysts Cut Their MorphoSys AG (ETR:MOR) Price Target To €29.30

Shareholders in MorphoSys AG (ETR:MOR) had a terrible week, as shares crashed 26% to €15.50 in the week since its latest third-quarter results. Revenues came in 50% better than analyst models expected, at €96m, although statutory losses ballooned 76% to €3.60, which is much worse than what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for MorphoSys

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Following the latest results, MorphoSys' ten analysts are now forecasting revenues of €334.5m in 2023. This would be a major 71% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 74% to €6.58. Before this earnings announcement, the analysts had been modelling revenues of €342.9m and losses of €6.55 per share in 2023.

The analysts have cut their price target 17% to €29.30per share, signalling that the declining revenue and ongoing losses are contributing to the lower 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. The most optimistic MorphoSys analyst has a price target of €65.00 per share, while the most pessimistic values it at €15.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. 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. The analysts are definitely expecting MorphoSys' growth to accelerate, with the forecast 54% annualised growth to the end of 2023 ranking favourably alongside historical growth of 25% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 25% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect MorphoSys to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster 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 MorphoSys' future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on MorphoSys. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple MorphoSys analysts - going out to 2024, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with MorphoSys (at least 2 which shouldn't be ignored) , and understanding these should be part of your investment process.

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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