One thing we could say about the covering analyst on Magic Software Enterprises Ltd. (NASDAQ:MGIC) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.

Following the latest downgrade, the sole analyst covering Magic Software Enterprises provided consensus estimates of US$474m revenue in 2024, which would reflect an uneasy 17% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to dive 30% to US$0.61 in the same period. Prior to this update, the analyst had been forecasting revenues of US$597m and earnings per share (EPS) of US$0.99 in 2024. Indeed, we can see that the analyst is a lot more bearish about Magic Software Enterprises' prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.

Check out 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 14% by the end of 2024. This indicates a significant reduction from annual growth of 17% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Magic Software Enterprises is expected to lag 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. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Magic Software Enterprises.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Magic Software Enterprises going out as far as 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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