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Melco Resorts & Entertainment Limited (NASDAQ:MLCO) Analysts Are Cutting Their Estimates: Here's What You Need To Know

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Last week, you might have seen that Melco Resorts & Entertainment Limited (NASDAQ:MLCO) released its first-quarter result to the market. The early response was not positive, with shares down 7.1% to US$15.14 in the past week. Revenues came in 30% better than analyst models expected, at US$811m, although statutory losses ballooned 27% to US$0.76, which is much worse than what was forecast. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Melco Resorts & Entertainment

NasdaqGS:MLCO Past and Future Earnings May 18th 2020
NasdaqGS:MLCO Past and Future Earnings May 18th 2020

Following the recent earnings report, the consensus from 19 analysts covering Melco Resorts & Entertainment is for revenues of US$3.61b in 2020, implying a sizeable 30% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.86 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$3.93b and losses of US$0.82 per share in 2020. While this year's revenue estimates dropped there was also a loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.

There was no major change to the consensus price target of US$22.33, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Melco Resorts & Entertainment, with the most bullish analyst valuing it at US$32.00 and the most bearish at US$10.40 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Melco Resorts & Entertainment's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 30% revenue decline a notable change from historical growth of 6.7% 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 15% annually for the foreseeable future. It's pretty clear that Melco Resorts & Entertainment's revenues are expected to perform substantially 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 Melco Resorts & Entertainment. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Melco Resorts & Entertainment going out to 2023, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Melco Resorts & Entertainment (1 is potentially serious) you should be aware of.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. 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. Thank you for reading.