Time To Worry? Analysts Just Downgraded Their CMGE Technology Group Limited (HKG:302) Outlook

The analysts covering CMGE Technology Group Limited (HKG:302) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the latest consensus from CMGE Technology Group's six analysts is for revenues of CN¥3.7b in 2023, which would reflect a substantial 23% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing CN¥4.6b of revenue in 2023. It looks like forecasts have become a fair bit less optimistic on CMGE Technology Group, given the substantial drop in revenue estimates.

Check out our latest analysis for CMGE Technology Group

The consensus price target fell 9.0% to CN¥2.69, with the analysts clearly less optimistic about CMGE Technology Group's valuation following this update. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic CMGE Technology Group analyst has a price target of CN¥3.68 per share, while the most pessimistic values it at CN¥1.58. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that CMGE Technology Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 23% annualised growth until the end of 2023. If achieved, this would be a much better result than the 10.0% annual decline over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 21% per year. So while CMGE Technology Group's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. The analysts also expect revenues to grow approximately in line with the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on CMGE Technology Group after today.

Of course, this isn't the full story. At least one of CMGE Technology Group's six analysts has provided estimates out to 2025, which can be seen for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.