The analyst covering Studio City International Holdings Limited (NYSE:MSC) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Bidders are definitely seeing a different story, with the stock price of US$15.52 reflecting a 12% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
After this downgrade, Studio City International Holdings' solo analyst is now forecasting revenues of US$331m in 2021. This would be a huge 71% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 14% from last year to US$3.14. However, before this estimates update, the consensus had been expecting revenues of US$416m and US$2.87 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 17% to US$9.10, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
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 Studio City International Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 71% revenue growth noticeably faster than its historical growth of 7.1% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 24% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analyst also expect Studio City International Holdings to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst increased their loss per share estimates for next year. Unfortunately, the analyst also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than 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. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Studio City International Holdings after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Studio City International Holdings going out as far as 2022, 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.
If you’re looking to trade Studio City International Holdings, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
Valuation is complex, but we're helping make it simple.
Find out whether Studio City International Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.