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Analysts Cut GW Pharmaceuticals’s Target Price after Q4 Earnings


Feb. 27 2020, Updated 12:08 p.m. ET

On Tuesday, GW Pharmaceuticals (NASDAQ:GWPH) reported its fourth-quarter earnings. The company reported revenue of $109.1 million, which beat analysts’ expectations of $105.1 million. However, the EBITDA loss and net loss were higher than analysts’ estimates. To learn more, read Analyzing GW Pharmaceuticals’ Q4 Earnings and Outlook. The higher-than-expected net losses led to a fall in GW Pharmaceuticals’s stock price. As of Wednesday, the company was trading at $107—a fall of 11.4% since reporting its fourth-quarter earnings. Let’s look at analysts’ reactions to the company’s fourth-quarter earnings.

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Analysts cut their target prices for GW Pharmaceuticals

GW Pharmaceuticals’s fourth-quarter results didn’t impress analysts. Following the company’s fourth-quarter earnings, Oppenheimer, Guggenheim, Needham, Morgan Stanley, and Cowen lowered their target prices. Let’s look at the price cuts.

  • Oppenheimer cut the target price from $203 to $173.
  • Guggenheim cut the target price from $185 to $154.
  • Needham cut the target price from $200 to $190.
  • Morgan Stanley cut the target price from $218 to $209.
  • Cowen cut the target price from $200 to $180.

Compared to January 26, analysts’ consensus target price has fallen by 2.5% from $201.53 to $196.49 as of Wednesday. The new target price represents a 12-month return potential of 83.6%. On the same day, Cresco Labs (OTCMKTS:CRLBF), Curaleaf Holdings (OTCMKTS:CURLF), and MedMen Enterprises (OTCMKTS:MMNFF) were trading at a discount of 142.7%, 109.9%, and 307.4% from their respective target prices.

AltaCorp Capital is still bullish on GW Pharmaceuticals

Despite GW Pharmaceuticals’s weak fourth-quarter earnings, David M. Kideckel of AltaCorp Capital is bullish on the stock, as reported by Cantech Letter. He thinks that the company’s continued sales growth of Epidiolex in the US and successful commercialization in Europe could drive sales in the near term. In his research note, Kideckel said that Epidiolex’s sales grew since more than 3,000 physicians currently prescribe it. In the near term, he expects GW Pharmaceuticals’s revenue to rise due to an increase in the total addressable market. The number of US physicians prescribing Epidiolex will likely rise to 6,000. Kideckel is also optimistic about the company’s initiatives to capture patients in the long-term care segment and expand its payor coverage.

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GW Pharmaceuticals is also working to get approval for Epidiolex to treat seizures associated with TSC (tuberous sclerosis complex) in the US and Europe. As reported by Cantech Letter, Kideckel thinks that expanding the Epidiolex label indication to TSC in the US and Europe could act as a catalyst for the company. Also, he’s optimistic about GW Pharmaceuticals’s drug developmental pipeline, which is progressing through several clinical trials.

However, Kideckel lowered the revenue estimates for fiscal 2020. He cited lower patient growth due to patient withdrawal rates. Kideckel added that it’s a “standard course for any pharmaceutical” and wasn’t due to the company’s fourth-quarter results. For fiscal 2020, he expects the company to post revenues of $501.0 million and a negative EBITDA of $18.5 million. Although Kideckel maintained his “outperform” rating for the stock, he lowered his target price from $230 to $215.

Analysts’ ratings

There were no rating changes from analysts following GW Pharmaceuticals’s fourth-quarter results. As of Wednesday, 15 analysts covered the stock. Among the analysts, five recommend a “strong-buy,” while ten recommend a “buy.” None of the analysts recommend a “hold” or “sell” rating. In the last 12 months, more analysts have started covering the stock. In February 2019, 13 analysts covered the stock compared to 15 analysts currently.

Let’s look at analysts’ rating for GW Pharmaceuticals’s peers:

  • Analysts are also bullish on Cresco Labs. All of the 13 analysts that follow the stock recommend a “buy.”
  • For Curaleaf Holdings, six of the seven analysts recommend a “buy.”
  • Analysts favor a “hold” rating for MedMen. Among the eight analysts that follow the stock, seven recommend a “hold.”

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