Bearish: Analysts Just Cut Their MediaAlpha, Inc. (NYSE:MAX) Revenue and EPS estimates

One thing we could say about the analysts on MediaAlpha, Inc. (NYSE:MAX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the seven analysts covering MediaAlpha provided consensus estimates of US$513m revenue in 2022, which would reflect a not inconsiderable 8.4% decline on its sales over the past 12 months. Losses are supposed to balloon 23% to US$0.63 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$586m and losses of US$0.52 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for MediaAlpha

There was no major change to the consensus price target of US$18.83, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic MediaAlpha analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$13.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would also point out that the forecast 16% annualised revenue decline to the end of 2022 is roughly in line with the historical trend, which saw revenues shrink 17% annually over the past year Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 12% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect MediaAlpha to suffer worse than the wider 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 MediaAlpha. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that MediaAlpha's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of MediaAlpha.

There might be good reason for analyst bearishness towards MediaAlpha, like dilutive stock issuance over the past year. Learn more, and discover the 2 other flags we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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