If a company releases a report that beats Wall Street predictions in earnings, why would a stock lose value?
2006-11-01 02:21:07 · 6 answers · asked by Anonymous in Business & Finance ➔ Investing
The stock price has more to do with expectations than the actual earnings number.
If the company beats earnings expectations but misses on revenue of some other metric, the stock price will often suffer. If the stock price has run up prior to earnings, the earnings report will often trigger selling (and a drop in price) no matter what the news.
If the company makes optimistic statements about coming quarters or raises guidance, the stock price will often go up even if the earnings disappoint.
2006-11-01 02:28:17 · answer #1 · answered by bookbyte 3 · 0⤊ 0⤋
There are many reasons. One is insider trading. Those who had access to the earning report prior to publication might have alread y accessed into buying and they book profit when the news come out. Two the information may be due to some non forseeable income creeping into the income statement like sale of an asset or a windfall which cannot be sustained for long. May be long term the company is a bad prospect for investment the way things are going.
2006-11-01 11:11:24 · answer #2 · answered by Mathew C 5 · 0⤊ 0⤋
In the short run, emotion and overall market momentum and direction drive the price of stocks in addition to financial results. If the market generally is headed down or a sector of the market is headed down, the stock of an individual company often moves with the market (or sector), despite the company's individual results. However, over the longer term, earnings growth and the absolute level of earnings as compared to other investments of comparable risk are the most fundamental drivers of a company's stock price.
2006-11-01 10:30:27 · answer #3 · answered by Tomel 3 · 0⤊ 0⤋
Many times it's the "forecast" that negatively affects it. I bought BEBE option last month. Last week they announced great earnings and beat the analysts estimates but the stock went down because BEBE forecasted lower earnings for next quarter and lower sales through the end of the year which is a key season for retailers. Hope that helps. Suffice to say, predicting stock movement is an inexact science. I recommend buying stocks or mutual funds that you want to hold for a long period (over one year). You'll typically get better returns and you won't pull your hair out stressing over earnings reports. Happy Investing.
2006-11-01 10:27:19 · answer #4 · answered by kosmoistheman 4 · 0⤊ 0⤋
Concur with those who have already answered. Saving key strokes.
2006-11-01 15:10:06 · answer #5 · answered by Anonymous · 0⤊ 0⤋
www.bullbythehorns.com. It is not my sight but this guy gives it to you straight and you will understand.
2006-11-03 00:12:30 · answer #6 · answered by Blanston 2 · 0⤊ 0⤋