Bearish: Analysts Just Cut Their Motorsport Games Inc. (NASDAQ:MSGM) Revenue and EPS estimates

The latest analyst coverage could presage a bad day for Motorsport Games Inc. (NASDAQ:MSGM), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Motorsport Games from its three analysts is for revenues of US$11m in 2023 which, if met, would be a reasonable 5.4% increase on its sales over the past 12 months. Losses are expected to increase substantially, hitting US$14.84 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$20m and losses of US$6.23 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for Motorsport Games

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 thing stands out from these estimates, which is that Motorsport Games is forecast to grow faster in the future than it has in the past, with revenues expected to display 5.4% annualised growth until the end of 2023. If achieved, this would be a much better result than the 6.4% annual decline over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.5% annually for the foreseeable future. Although Motorsport Games' revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Motorsport Games. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Motorsport Games' revenues are expected to grow slower than the wider market. We wouldn't be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like analysts have become a lot more bearish on Motorsport Games, and their negativity could be grounds for caution.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Motorsport Games' business, like a short cash runway. For more information, you can click here to discover this and the 2 other concerns we've identified.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.