The analysts covering MediaAlpha, Inc. (NYSE:MAX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the latest downgrade, the seven analysts covering MediaAlpha provided consensus estimates of US$583m revenue in 2022, which would reflect a small 5.1% decline on its sales over the past 12 months. Losses are supposed to balloon 164% to US$0.55 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$671m and losses of US$0.20 per share in 2022. 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.
There was no major change to the consensus price target of US$19.64, 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. Currently, the most bullish analyst values MediaAlpha at US$38.00 per share, while the most bearish prices it at US$14.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that MediaAlpha's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 6.8% to the end of 2022. This tops off a historical decline of 3.9% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 13% per year. 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 take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 3 other risks 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.