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Earnings Update: Here's Why Analysts Just Lifted Their MagnaChip Semiconductor Corporation Price Target To US$18.00

Simply Wall St
·3 mins read

MagnaChip Semiconductor Corporation (NYSE:MX) shares fell 2.3% to US$14.51 in the week since its latest full-year results. It was a pretty bad result overall; while revenues were in line with expectations at US$792m, statutory losses exploded to US$0.64 per share. Following the result, 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.

See our latest analysis for MagnaChip Semiconductor

NYSE:MX Past and Future Earnings, February 23rd 2020
NYSE:MX Past and Future Earnings, February 23rd 2020

After the latest results, the twin analysts covering MagnaChip Semiconductor are now predicting revenues of US$808.3m in 2020. If met, this would reflect an okay 2.0% improvement in sales compared to the last 12 months. MagnaChip Semiconductor is also expected to turn profitable, with statutory earnings of US$0.86 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$822.5m and earnings per share (EPS) of US$0.85 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

With analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 5.9% to US$18.00. It looks as though analysts previously had some doubts over whether the business would live up to their expectations.

Further, we can compare these estimates to past performance, and see how MagnaChip Semiconductor forecasts compare to the wider market's forecast performance. We would highlight that MagnaChip Semiconductor's revenue growth is expected to slow, with forecast 2.0% increase next year well below the historical 3.3%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 9.0% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect MagnaChip Semiconductor to grow slower than the wider market.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that MagnaChip Semiconductor's revenues are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on MagnaChip Semiconductor. Long-term earnings power is much more important than next year's profits. We have analyst estimates for MagnaChip Semiconductor going out as far as 2021, and you can see them free on our platform here.

You can also view our analysis of MagnaChip Semiconductor's balance sheet, and whether we think MagnaChip Semiconductor is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.