The latest analyst coverage could presage a bad day for Public Joint Stock Company Magnit (MCX:MGNT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook – perhaps a sign that investors should temper their expectations as well.
After the downgrade, the nine analysts covering Magnit are now predicting revenues of ₽1.6t in 2020. If met, this would reflect a notable 13% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of ₽1.8t in 2020. The consensus view seems to have become more pessimistic on Magnit, noting the substantial drop in revenue estimates in this update.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Magnit’s growth to accelerate, with the forecast 13% growth ranking favourably alongside historical growth of 4.9% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.5% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Magnit is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. Analysts also expect revenues to grow faster than the wider market. Overall, given the drastic downgrade to this year’s forecasts, we’d be feeling a little more wary of Magnit going forwards.
After a downgrade like this, it’s pretty clear that previous forecasts were too optimistic. What’s more, we’ve spotted several possible issues with Magnit’s business, like the risk of cutting its dividend. Learn more, and discover the 2 other flags we’ve identified, for 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 that insiders are buying.
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