Formula One Group (NASDAQ:FWON.K) Just Reported Third-Quarter Earnings: Have Analysts Changed Their Mind On The Stock?

Last week, you might have seen that Formula One Group (NASDAQ:FWON.K) released its third-quarter result to the market. The early response was not positive, with shares down 2.5% to US$57.04 in the past week. Revenues were US$715m, with Formula One Group reporting some 4.2% below analyst expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Our analysis indicates that FWON.K is potentially undervalued!

Taking into account the latest results, the most recent consensus for Formula One Group from eleven analysts is for revenues of US$2.95b in 2023 which, if met, would be a meaningful 13% increase on its sales over the past 12 months. Statutory earnings per share are predicted to bounce 385% to US$0.73. Before this earnings report, the analysts had been forecasting revenues of US$2.94b and earnings per share (EPS) of US$0.86 in 2023. So there's definitely been a decline in sentiment after the latest results, noting the substantial drop in new EPS forecasts.

The consensus price target held steady at US$66.38, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 Formula One Group analyst has a price target of US$75.00 per share, while the most pessimistic values it at US$49.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Formula One Group's past performance and to peers in the same industry. It's clear from the latest estimates that Formula One Group's rate of growth is expected to accelerate meaningfully, with the forecast 11% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 5.5% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.1% annually. Formula One Group is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Formula One Group. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at US$66.38, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Formula One Group going out to 2024, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Formula One Group that you should be aware of.

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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.