These Analysts Just Made A Huge Downgrade To Their Maoyan Entertainment (HKG:1896) EPS Forecasts

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) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the ten analysts covering Maoyan Entertainment, is for revenues of CN¥2.9b in 2022, which would reflect an uneasy 14% reduction in Maoyan Entertainment's sales over the past 12 months. Statutory earnings per share are supposed to reduce 10.0% to CN¥0.29 in the same period. Previously, the analysts had been modelling revenues of CN¥3.5b and earnings per share (EPS) of CN¥0.44 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

Check out our latest analysis for Maoyan Entertainment

Analysts made no major changes to their price target of CN¥8.06, suggesting the downgrades are not expected to have a long-term impact on Maoyan Entertainment's 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. The most optimistic Maoyan Entertainment analyst has a price target of CN¥11.00 per share, while the most pessimistic values it at CN¥6.47. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One more thing stood out to us about these estimates, and it's the idea that Maoyan Entertainment's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 14% to the end of 2022. This tops off a historical decline of 1.0% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 21% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Maoyan Entertainment to suffer worse than the wider 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Maoyan Entertainment.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Maoyan Entertainment going out to 2024, and you can see them free on our platform here.

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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.