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Orthogonal to my peeve. :-) After earnings, there are two questions: 1. How did X do? 2. How did analysts think X would do? Perfect analysts would predic

Orthogonal to my peeve. :-) After earnings, there are two questions: 1. How did X do? 2. How did analysts think X would do? Perfect analysts would predict Xs earnings every time, and the stock would be unaffected by announcements. But analysts aren't perfect. That's ok! What's not ok is that the headlines are invariably "X misses expectations". No, the expectations were wrong. I'm not saying a company can't do well or badly. Only that its job is not to match analyst expectations, and "X misses expectations" promotes that fiction.

WalterBright 10y ago
If you're used to reading the financial news, the headline is fine, since you know what they're talking about.
- afthonos 10y ago
  I'm not so sure. "Analysts Miss X Results" immediately makes you wonder "why", which is a fair question. "X Misses Expectations" instead makes you think X had a bad quarter. I think forcing people to make the conversion in their head every time is bad headlining. Of course, there's something to be said for it being a "term of art". This may just be my layman's interpretation.
  - WalterBright 10y ago
    Every field has its own jargon and shorthand notations. This particular headline is phrased in the usual way for such things.
    - afthonos 10y ago
      True and fair, yet see pc86's comment and my reply to it for exactly the kind of confusion that can arise. :-)
pc86 10y ago
Analysts aren't saying "I think GOOG will grow by X% because reasons," they're saying that based on all factors, if GOOG is run well and executes well, it will grow by X%. Growing by less, even when "less" is 20% and many billions of dollars, means that the analysts believe there is some inefficiency and GOOG, which is why a stock can drop after a company posts a 20% gain in revenue.
- afthonos 10y ago
  With the caveat below (i.e. maybe it's a term of art that I don't understand), I think that's precisely the misunderstanding I'm talking about. Say I want to buy stock in a company. To decide which, I look at what analysts have to say about various companies, and pick one that they predict will do well. That's the job of analysts: to give prospective buyers (and sellers) an idea of where a company is heading so we can make buy/sell decisions. That's very different from grading the "efficiency" of the company. In fact, the analyst's job is to take as many inefficiencies into account as they can. I don't care if this company under pristine circumstances can get 60% profit margins; if the analyst knows the current circumstances can only yield 20%, they had better give me an estimate of performance with 20% in it. Seen in that light, analysts predicting something different from the company's actual output is clearly an analyst failure. But do notice that this doesn't mean the stock should ignore the error, since buy/sell decisions are made on the basis of analysts' expectations.

WalterBright 10y ago

If you're used to reading the financial news, the headline is fine, since you know what they're talking about.

afthonos 10y ago
I'm not so sure. "Analysts Miss X Results" immediately makes you wonder "why", which is a fair question. "X Misses Expectations" instead makes you think X had a bad quarter. I think forcing people to make the conversion in their head every time is bad headlining. Of course, there's something to be said for it being a "term of art". This may just be my layman's interpretation.
- WalterBright 10y ago
  Every field has its own jargon and shorthand notations. This particular headline is phrased in the usual way for such things.
  - afthonos 10y ago
    True and fair, yet see pc86's comment and my reply to it for exactly the kind of confusion that can arise. :-)

pc86 10y ago

Analysts aren't saying "I think GOOG will grow by X% because reasons," they're saying that based on all factors, if GOOG is run well and executes well, it will grow by X%. Growing by less, even when "less" is 20% and many billions of dollars, means that the analysts believe there is some inefficiency and GOOG, which is why a stock can drop after a company posts a 20% gain in revenue.

afthonos 10y ago
With the caveat below (i.e. maybe it's a term of art that I don't understand), I think that's precisely the misunderstanding I'm talking about. Say I want to buy stock in a company. To decide which, I look at what analysts have to say about various companies, and pick one that they predict will do well. That's the job of analysts: to give prospective buyers (and sellers) an idea of where a company is heading so we can make buy/sell decisions. That's very different from grading the "efficiency" of the company. In fact, the analyst's job is to take as many inefficiencies into account as they can. I don't care if this company under pristine circumstances can get 60% profit margins; if the analyst knows the current circumstances can only yield 20%, they had better give me an estimate of performance with 20% in it. Seen in that light, analysts predicting something different from the company's actual output is clearly an analyst failure. But do notice that this doesn't mean the stock should ignore the error, since buy/sell decisions are made on the basis of analysts' expectations.