Definition: Market prospects are a company’s potential future performance in a competitive marketplace. In other words, a company’s market prospects are the company’s forecasted ability to compete in a marketplace.
What Does Market Prospect Mean?
Both internal and external analysts compare past company performance with current competition and expectations of future products to develop a company’s market prospects. Market prospects can be good or bad and favorable or unfavorable.
For example, Microsoft entered the gaming industry in 2001 with the Xbox gaming console. Many people were excited to see what Microsoft could do with in this new industry, so many analysts said that Microsoft had high or favorable market prospects in the gaming industry.
After a series of marking flops, manufacturing defects, and failed sales forecasts, many investors speculated that the Xbox’s once favorable market prospects were declining and Microsoft would soon cease production on the gaming console.v
Microsoft recalled many of the defective Xbox consoles and continued to build its reputation and gaming license library and today it is one of the most popular, if not the most popular, gaming systems in the world.
Market prospects are often considered one of the building blocks for analyzing a company’s future performance. Investors and creditors are not only interested in whether the business can survive, they want to know if the business can succeed and grow. Investors and creditors tend to look at market prospects, liquidity, solvency, and profitability along with other performance metrics when evaluating the future performance of a company.