Today is shaping up negative for Mersana Therapeutics, Inc. (NASDAQ:MRSN) 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.

Following the latest downgrade, the current consensus, from the ten analysts covering Mersana Therapeutics, is for revenues of US$26m in 2024, which would reflect a considerable 12% reduction in Mersana Therapeutics' sales over the past 12 months. Losses are presumed to reduce, shrinking 18% per share from last year to US$0.70. However, before this estimates update, the consensus had been expecting revenues of US$38m and US$0.62 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.

There was no major change to the consensus price target of US$6.44, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 23% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 16% 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 23% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Mersana Therapeutics 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 Mersana Therapeutics. 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 Mersana Therapeutics after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Mersana Therapeutics going out to 2026, 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 backed by insiders.

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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.