Time To Worry? Analysts Just Downgraded Their Wynn Macau, Limited (HKG:1128) Outlook

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. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the twelve analysts covering Wynn Macau are now predicting revenues of US$10b in 2022. If met, this would reflect a substantial improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.04 per share. However, before this estimates update, the consensus had been expecting revenues of US$12b and US$0.96 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$7.43, 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. There are some variant perceptions on Wynn Macau, with the most bullish analyst valuing it at HK$23.56 and the most bearish at HK$4.20 per share. 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. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Wynn Macau's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Wynn Macau is forecast to grow faster in the future than it has in the past, with revenues expected to display 13x annualised growth until the end of 2022. If achieved, this would be a much better result than the 23% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 25% per year. Not only are Wynn Macau's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than 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 Wynn Macau. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Wynn Macau going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Wynn Macau analysts - going out to 2024, 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 that insiders are buying.

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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.