Analysts Are Updating Their MGM China Holdings Limited (HKG:2282) Estimates After Its Second-Quarter Results

MGM China Holdings Limited (HKG:2282) shareholders are probably feeling a little disappointed, since its shares fell 4.6% to HK$11.10 in the week after its latest quarterly results. Overall the results were a little better than the analysts were expecting, with revenues beating forecasts by 3.2%to hit HK$8.0b. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for MGM China Holdings

After the latest results, the 15 analysts covering MGM China Holdings are now predicting revenues of HK$31.6b in 2024. If met, this would reflect a reasonable 4.5% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to climb 11% to HK$1.32. Before this earnings report, the analysts had been forecasting revenues of HK$31.6b and earnings per share (EPS) of HK$1.30 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at HK$16.98. 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. The most optimistic MGM China Holdings analyst has a price target of HK$19.30 per share, while the most pessimistic values it at HK$12.50. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that MGM China Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 9.2% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 5.5% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 13% annually. So it's clear that despite the acceleration in growth, MGM China Holdings is expected to grow meaningfully slower than the industry average.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on MGM China Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for MGM China Holdings going out to 2026, and you can see them free on our platform here.

Even so, be aware that MGM China Holdings is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.