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It's been a sad week for Marchex, Inc. (NASDAQ:MCHX), who've watched their investment drop 17% to US$1.36 in the week since the company reported its quarterly result. Revenues of US$25m beat expectations by a respectable 6.3%, although statutory losses per share increased. Marchex lost US$0.53, which was 715% more than what the analysts had included in their models. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Marchex after the latest results.
Taking into account the latest results, the current consensus, from the twin analysts covering Marchex, is for revenues of US$87.0m in 2020, which would reflect a not inconsiderable 17% reduction in Marchex's sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 45% to US$0.33. Before this earnings announcement, the analysts had been modelling revenues of US$92.3m and losses of US$0.20 per share in 2020. So it's pretty clear the analysts have mixed opinions on Marchex after this update; revenues were downgraded and per-share losses expected to increase.
The consensus price target fell 20% to US$4.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.
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 five years, revenues have declined around 12% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 17% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.4% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Marchex to suffer worse than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Marchex. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have analyst estimates for Marchex going out as far as 2021, and you can see them free on our platform here.
Even so, be aware that Marchex is showing 3 warning signs in our investment analysis , you should know about...
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