MultiPlan Corporation (NYSE:MPLN) Analysts Just Trimmed Their Revenue Forecasts By 15%

Market forces rained on the parade of MultiPlan Corporation (NYSE:MPLN) shareholders today, when the analysts downgraded their forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the consensus from MultiPlan's dual analysts is for revenues of US$1.0b in 2023, which would reflect a not inconsiderable 11% decline in sales compared to the last year of performance. Prior to the latest estimates, the analysts were forecasting revenues of US$1.2b in 2023. The consensus view seems to have become more pessimistic on MultiPlan, noting the substantial drop in revenue estimates in this update.

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Notably, the analysts have cut their price target 44% to US$2.68, suggesting concerns around MultiPlan's valuation. 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 MultiPlan analyst has a price target of US$3.00 per share, while the most pessimistic values it at US$2.05. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 9.2% by the end of 2023. This indicates a significant reduction from annual growth of 2.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - MultiPlan is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for next year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of MultiPlan's future valuation. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of MultiPlan going forwards.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with MultiPlan, including recent substantial insider selling. Learn more, and discover the 1 other warning sign we've identified, for 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.