Today is shaping up negative for Alector, Inc. (NASDAQ:ALEC) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the current consensus, from the nine analysts covering Alector, is for revenues of US$42m in 2025, which would reflect a concerning 31% reduction in Alector's sales over the past 12 months. Losses are expected to increase substantially, hitting US$1.83 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$90m and losses of US$1.68 per share in 2025. 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 fell 23% to US$5.51, implicitly signalling that lower earnings per share are a leading indicator for Alector's valuation.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 26% by the end of 2025. This indicates a significant reduction from annual growth of 18% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 21% annually for the foreseeable future. It's pretty clear that Alector's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Alector going forwards.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Alector analysts - going out to 2026, 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 with high insider ownership.

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