Earnings Update: Motorsport Games Inc. (NASDAQ:MSGM) Just Reported And Analysts Are Trimming Their Forecasts

Motorsport Games Inc. (NASDAQ:MSGM) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues of US$2.0m beat expectations by a respectable 10.0%, although statutory losses per share increased. Motorsport Games lost US$0.63, which was 38% more than what the analysts had included in their models. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Motorsport Games

Following the recent earnings report, the consensus from four analysts covering Motorsport Games is for revenues of US$13.8m in 2022, implying a considerable 12% decline in sales compared to the last 12 months. Losses are forecast to narrow 8.5% to US$2.83 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$15.9m and losses of US$2.22 per share in 2022. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The analysts lifted their price target 30% to US$3.25, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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 Motorsport Games analyst has a price target of US$4.00 per share, while the most pessimistic values it at US$2.50. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Motorsport Games shareholders.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Over the past year, revenues have declined around 5.7% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 22% decline in revenue until the end of 2022. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 10% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Motorsport Games to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Motorsport Games going out to 2024, and you can see them free on our platform here..

You should always think about risks though. Case in point, we've spotted 4 warning signs for Motorsport Games you should be aware of, and 3 of them are concerning.

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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.