Things Look Grim For MGI Tech Co., Ltd. (SHSE:688114) After Today's Downgrade

The analysts covering MGI Tech Co., Ltd. (SHSE:688114) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from MGI Tech's six analysts is for revenues of CN¥3.0b in 2024 which - if met - would reflect a notable 13% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 57% to CN¥0.85 per share. Yet before this consensus update, the analysts had been forecasting revenues of CN¥3.5b and losses of CN¥0.48 per share in 2024. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for MGI Tech

The consensus price target fell 22% to CN¥60.48, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that MGI Tech is forecast to grow faster in the future than it has in the past, with revenues expected to display 27% annualised growth until the end of 2024. If achieved, this would be a much better result than the 16% annual decline over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 13% annually. Not only are MGI Tech's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of MGI Tech.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for MGI Tech going out to 2026, and you can see them 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 backed by insiders.

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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.