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I've noticed that companies' stock prices don't always correlate to the performance of their past quarter. Wonder why

by TravisSc6tt 6y ago

gruglife 6y ago
Stock price is forward looking, not past.
deleted 6y ago
[deleted]
formercoder 6y ago
Some combination of momentum with the market or sector, pricing in future growth, an earnings call that does a good job explaining the bad quarter.
asdff 6y ago
If the news is expected to be bad, but is actually less bad than anticipated, then the stock goes up, even if it's bad. There's been a lot of that lately.
vikramkr 6y ago
In what sense do you mean they don't correlate to performance? Overperforming or underperforming expectations will correlate very highly to the way the stock moves on the news
tempestn 6y ago
Change in stock price on earnings news tends to correlate to the performance relative to expectations. The estimated performance is already priced in, so the movement will be based on how much better or worse the actual results were than the estimated/anticipated ones. In this case, it was obviously a bad quarter for Tesla, but the bump suggests that traders expected it to be even worse.
- AmericanChopper 6y ago
  To add something to this, traders have their own expectations of how companies will perform relative to their published estimates. I used to work at a unicorn that would consistently exceed its published estimates, and the stock price took a non-trivial hit the first time it ever met them.
- Zenbit_UX 6y ago
  > but the bump suggests that traders expected it to be even worse. You're a bit too kind with your wording, it doesn't _suggests_ so much as it literally _means_ that. Plenty of websites show you what investors are expecting, if Tesla says more/less price fluctuates accordingly.
  - tempestn 6y ago
    Normally, and apparently in this case, yes. It is possible for a stock to go up on earnings that don't beat expectations though, due to other concurrent factors, like unexpected positive news regarding future prospects, or even an unrelated broad market movement.
  - gpm 6y ago
    > Plenty of websites show you what investors are expecting Yes and no. Plenty of websites make predictions. Most money in the market however is controlled by institutions that don't tell you shit about what they are expecting or anything else that they aren't legally required to tell you.
chrisseaton 6y ago
You buy stocks based on what you think they’ll do next, not what they did previously.
taurath 6y ago
Stock price is extremely sensitive to both guidance from the company and analysis. There's almost always an analyst consensus on the expected performance of the stock given the knowns about the companys performance and the market. The stock is usually pegged right at that consensus, so if they lose less money than than the consensus was expecting (even if they lost more money) then the price goes up.
andrepd 6y ago
Maybe the market is not so intelligent after all.

I've noticed that companies' stock prices don't always correlate to the performance of their past quarter. Wonder why

gruglife 6y ago

Stock price is forward looking, not past.

deleted 6y ago

[deleted]

formercoder 6y ago

Some combination of momentum with the market or sector, pricing in future growth, an earnings call that does a good job explaining the bad quarter.

asdff 6y ago

If the news is expected to be bad, but is actually less bad than anticipated, then the stock goes up, even if it's bad. There's been a lot of that lately.

vikramkr 6y ago

In what sense do you mean they don't correlate to performance? Overperforming or underperforming expectations will correlate very highly to the way the stock moves on the news

tempestn 6y ago

Change in stock price on earnings news tends to correlate to the performance relative to expectations. The estimated performance is already priced in, so the movement will be based on how much better or worse the actual results were than the estimated/anticipated ones. In this case, it was obviously a bad quarter for Tesla, but the bump suggests that traders expected it to be even worse.

AmericanChopper 6y ago
To add something to this, traders have their own expectations of how companies will perform relative to their published estimates. I used to work at a unicorn that would consistently exceed its published estimates, and the stock price took a non-trivial hit the first time it ever met them.
Zenbit_UX 6y ago
> but the bump suggests that traders expected it to be even worse. You're a bit too kind with your wording, it doesn't _suggests_ so much as it literally _means_ that. Plenty of websites show you what investors are expecting, if Tesla says more/less price fluctuates accordingly.
- tempestn 6y ago
  Normally, and apparently in this case, yes. It is possible for a stock to go up on earnings that don't beat expectations though, due to other concurrent factors, like unexpected positive news regarding future prospects, or even an unrelated broad market movement.
- gpm 6y ago
  > Plenty of websites show you what investors are expecting Yes and no. Plenty of websites make predictions. Most money in the market however is controlled by institutions that don't tell you shit about what they are expecting or anything else that they aren't legally required to tell you.

chrisseaton 6y ago

You buy stocks based on what you think they’ll do next, not what they did previously.

taurath 6y ago

Stock price is extremely sensitive to both guidance from the company and analysis. There's almost always an analyst consensus on the expected performance of the stock given the knowns about the companys performance and the market. The stock is usually pegged right at that consensus, so if they lose less money than than the consensus was expecting (even if they lost more money) then the price goes up.

andrepd 6y ago

Maybe the market is not so intelligent after all.