Analysts Are More Bearish On Maoyan Entertainment (HKG:1896) Than They Used To Be

The analysts covering Maoyan Entertainment (HKG:1896) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from Maoyan Entertainment's seven analysts is for revenues of CN¥3.5b in 2022, which would reflect a satisfactory 4.7% improvement in sales compared to the last 12 months. Per-share earnings are expected to climb 18% to CN¥0.38. Before this latest update, the analysts had been forecasting revenues of CN¥4.1b and earnings per share (EPS) of CN¥0.62 in 2022. Indeed, we can see that the analysts are a lot more bearish about Maoyan Entertainment's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Maoyan Entertainment

It'll come as no surprise then, to learn that the analysts have cut their price target 17% to CN¥8.65. 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. There are some variant perceptions on Maoyan Entertainment, with the most bullish analyst valuing it at CN¥17.97 and the most bearish at CN¥6.49 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. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Maoyan Entertainment's past performance and to peers in the same industry. For example, we noticed that Maoyan Entertainment's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 4.7% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 1.0% a year 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 22% annually for the foreseeable future. So although Maoyan Entertainment's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Maoyan Entertainment's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Maoyan Entertainment.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Maoyan Entertainment 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.