Some Galaxy Entertainment Group Limited (HKG:27) Analysts Just Made A Major Cut To Next Year's Estimates

Today is shaping up negative for Galaxy Entertainment Group Limited (HKG:27) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the downgrade, the current consensus from Galaxy Entertainment Group's 15 analysts is for revenues of HK$16b in 2022 which - if met - would reflect an okay 3.7% increase on its sales over the past 12 months. Per-share losses are expected to explode, reaching HK$0.24 per share. Before this latest update, the analysts had been forecasting revenues of HK$19b and earnings per share (EPS) of HK$0.28 in 2022. There looks to have been a major change in sentiment regarding Galaxy Entertainment Group's prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.

View our latest analysis for Galaxy Entertainment Group

There was no major change to the consensus price target of HK$51.32, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Galaxy Entertainment Group, with the most bullish analyst valuing it at HK$60.00 and the most bearish at HK$35.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. One thing stands out from these estimates, which is that Galaxy Entertainment Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 7.6% annualised growth until the end of 2022. If achieved, this would be a much better result than the 25% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 24% annually for the foreseeable future. Although Galaxy Entertainment Group's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Galaxy Entertainment Group to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Galaxy Entertainment Group after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Galaxy Entertainment Group 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.