Market forces rained on the parade of Relay Therapeutics, Inc. (NASDAQ:RLAY) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from Relay Therapeutics' nine analysts is for revenues of US$11m in 2026, which would reflect a satisfactory 2.1% improvement in sales compared to the last 12 months. Losses are supposed to balloon 23% to US$1.60 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$12m and losses of US$1.54 per share in 2026. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

The consensus price target was broadly unchanged at US$26.77, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Relay Therapeutics' past performance and to peers in the same industry. One thing stands out from these estimates, which is that Relay Therapeutics is forecast to grow faster in the future than it has in the past, with revenues expected to display 4.2% annualised growth until the end of 2026. If achieved, this would be a much better result than the 30% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 23% per year. So although Relay Therapeutics' revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Relay Therapeutics' revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Relay Therapeutics going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Relay Therapeutics analysts - going out to 2028, 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.

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.