Analyst Forecasts Just Became More Bearish On MaxLinear, Inc. (NASDAQ:MXL)
One thing we could say about the analysts on MaxLinear, Inc. (NASDAQ:MXL) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At US$24.16, shares are up 7.1% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, the ten analysts covering MaxLinear provided consensus estimates of US$718m revenue in 2023, which would reflect a substantial 29% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$821m of revenue in 2023. It looks like forecasts have become a fair bit less optimistic on MaxLinear, given the measurable cut to revenue estimates.
See our latest analysis for MaxLinear
Notably, the analysts have cut their price target 13% to US$32.50, suggesting concerns around MaxLinear's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on MaxLinear, with the most bullish analyst valuing it at US$45.00 and the most bearish at US$25.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 49% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 29% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. It's pretty clear that MaxLinear's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of MaxLinear's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on MaxLinear after today.
Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on MaxLinear that suggests the company could be somewhat overvalued. Find out why, and see how we estimate the valuation 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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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.
