One Analyst Just Shaved Their Magic Software Enterprises Ltd. (NASDAQ:MGIC) Forecasts Dramatically
The latest analyst coverage could presage a bad day for Magic Software Enterprises Ltd. (NASDAQ:MGIC), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
Following the downgrade, the consensus from one analyst covering Magic Software Enterprises is for revenues of US$474m in 2024, implying a not inconsiderable 17% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 30% to US$0.61 in the same period. Previously, the analyst had been modelling revenues of US$597m and earnings per share (EPS) of US$0.99 in 2024. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.
See our latest analysis for Magic Software Enterprises
The consensus price target fell 28% to US$13.00, with the weaker earnings outlook clearly leading analyst valuation 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. We would highlight that sales are expected to reverse, with a forecast 14% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 17% 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 12% annually for the foreseeable future. It's pretty clear that Magic Software Enterprises' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of Magic Software Enterprises.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2024, which can be seen 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.
