I don't get it. Increased profits/earnings, record growth, global expansion...yet the stock goes down. I obviously don't understand the dynamics of the stock market and the triggers. You would think those things would make a stock rise...but that's obviously not the case. Anybody got any insight on what causes this inverted stock reaction to positive financials?
2007-02-01 04:52:44 · 7 answers · asked by burntinthemeltingpot 2 in Business & Finance ➔ Investing
The way the market works is that the stock price of a company will rise or fall in anticipation of the news. With SBUX, the profits, expansions and so forth is already in the price of the stock.
The stock is simply taking a "breather" or correcting, which is very healthy for the long term growth of the stock. SBUX is still in a beautiful uptrend, and it will continue in the uptrend, but occasionally it will correct.
Once you learn technical analysis, then you will be better at timing your buys and sells. But, if you are holding SBUX for the long term, don't worry about these corrections. That's how Warren Buffet made his fortune - patience, however he started investing since he was 13 years old.
Good luck.
2007-02-01 05:40:26 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Always keep in mind the first rule of pricing, which is quite apart from value:
-In a free market price is determined ONLY by what people are willing to pay
So, if people are responding emotionally (the usual case), they will create a price very different from a rational assessment of the value. This is why the average investor loses on average.
As for Starbucks, ten years ago I looked briefly at the stock, which was hot then, because of increased profits, etc. Since all these indicators can be "gamed", particularly for newer investments, I did some shoe sole research, stopping in at a Starbucks to see what all the fuss was about. My conclusion was, how can they find enough idiots to pay three bucks for a nice but not that exceptional cup of coffee to have any long term growth. Great lesson for me, but all the same I would like to put my eggs in other, less chancy baskets. If you would like to get into this stock long term, I would suggest waiting until this overheated market corrects before buying.
2007-02-01 05:27:08 · answer #2 · answered by Jack D 2 · 0⤊ 0⤋
Its all based on expectations. Their profits may have grown by 20%, but if investors expected it to grow by 30%, the stock will drop. In Starbucks' case, investors may be worried about market saturation, as you can't walk two blocks in a major metro area without seeing a coffee shop.
2007-02-01 04:57:13 · answer #3 · answered by Crabboy4 4 · 0⤊ 0⤋
It has to do with the stock's valuation and expectation. You are correct, they reported a nice quarter, but Wall St. was expecting more given their P/E ratio is so high. This is the risk with stocks that trades at high multiple. Check out http://ibooyah.com for more stock analysis, including Starbucks.
2007-02-01 12:03:05 · answer #4 · answered by Anonymous · 0⤊ 0⤋
One bad quarter followed by a good quarter. The retail/restaurant sectors with same stores sales metrics are tough to game. I wouldn't worry though for the reasons you give. Starbucks has great management and can be held for a long term investment.
2007-02-01 05:26:05 · answer #5 · answered by mdf666 1 · 0⤊ 0⤋
That's the way the market is at present.
Witness Google. It shows increased revenues, beats estimate, yet the price drops.
2007-02-01 11:10:13 · answer #6 · answered by ckm1956 7 · 0⤊ 0⤋
the stock market is fixed.
2007-02-01 04:55:08 · answer #7 · answered by Stephen R 3 · 0⤊ 1⤋