These Analysts Just Made A Decent Downgrade To Their Wynn Macau, Limited (HKG:1128) EPS Forecasts

One thing we could say about the analysts on Wynn Macau, Limited (HKG:1128) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the consensus from Wynn Macau's twelve analysts is for revenues of HK$7.4b in 2022, which would reflect an uncomfortable 9.6% decline in sales compared to the last year of performance. Losses are forecast to narrow 6.1% to HK$1.19 per share. However, before this estimates update, the consensus had been expecting revenues of HK$10b and HK$1.04 per share in losses. 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.

View our latest analysis for Wynn Macau

The consensus price target was broadly unchanged at HK$7.29, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Wynn Macau at HK$23.56 per share, while the most bearish prices it at HK$4.20. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would also point out that the forecast 13% annualised revenue decline to the end of 2022 is better than the historical trend, which saw revenues shrink 27% annually 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 25% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Wynn Macau to suffer 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 this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Wynn Macau's revenues are expected to grow 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 Wynn Macau after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Wynn Macau going out to 2024, and you can see them free on our platform here.

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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.