Celebrations may be in order for Fate Therapeutics, Inc. (NASDAQ:FATE) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The revenue forecast for this year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline.

Following the upgrade, the consensus from 18 analysts covering Fate Therapeutics is for revenues of US$73m in 2023, implying a disturbing 46% decline in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 20% from last year to US$1.91. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$52m and losses of US$2.11 per share in 2023. 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.

View our latest analysis for Fate Therapeutics

There was no major change to the consensus price target of US$8.16, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Fate Therapeutics analyst has a price target of US$16.00 per share, while the most pessimistic values it at US$4.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Fate Therapeutics' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 57% by the end of 2023. This indicates a significant reduction from annual growth of 59% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 17% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Fate Therapeutics is expected to lag the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Fate Therapeutics is moving incrementally towards profitability. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Fate Therapeutics.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Fate Therapeutics 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.

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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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