The analysts covering MaxLinear, Inc. (NASDAQ:MXL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

After the downgrade, the consensus from MaxLinear's eleven analysts is for revenues of US$823m in 2023, which would reflect a substantial 26% decline in sales compared to the last year of performance. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.21 per share in 2023. Prior to this update, the analysts had been forecasting revenues of US$967m and earnings per share (EPS) of US$0.65 in 2023. There looks to have been a major change in sentiment regarding MaxLinear's prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.

See our latest analysis for MaxLinear

The consensus price target fell 17% to US$39.00, implicitly signalling that lower earnings per share are a leading indicator for MaxLinear's 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. Currently, the most bullish analyst values MaxLinear at US$60.00 per share, while the most bearish prices it at US$25.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 33% by the end of 2023. This indicates a significant reduction from annual growth of 28% 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 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - MaxLinear is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting MaxLinear to become unprofitable this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that MaxLinear's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of MaxLinear.

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 MaxLinear going out to 2025, 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 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.

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