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The analysts covering Enthusiast Gaming Holdings Inc. (TSE:EGLX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the current consensus from Enthusiast Gaming Holdings' seven analysts is for revenues of CA$214m in 2023 which - if met - would reflect a modest 5.3% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing CA$250m of revenue in 2023. The consensus view seems to have become more pessimistic on Enthusiast Gaming Holdings, noting the measurable cut to revenue estimates in this update.
Check out our latest analysis for Enthusiast Gaming Holdings
Notably, the analysts have cut their price target 16% to CA$3.43, suggesting concerns around Enthusiast Gaming Holdings' valuation. 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 Enthusiast Gaming Holdings, with the most bullish analyst valuing it at CA$3.75 and the most bearish at CA$3.00 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
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 Enthusiast Gaming Holdings' revenue growth is expected to slow, with the forecast 5.3% annualised growth rate until the end of 2023 being well below the historical 65% p.a. growth over the last three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.6% annually. Factoring in the forecast slowdown in growth, it looks like Enthusiast Gaming Holdings is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. Analysts also expect revenues to grow approximately in line with the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Enthusiast Gaming Holdings after today.