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It makes perfect sense. If you're widely expected to make a lot of money, people will price that into your stock. If you make a lot minus n, you're doing less
by AlisdairO 14y ago
It makes perfect sense. If you're widely expected to make a lot of money, people will price that into your stock. If you make a lot minus n, you're doing less well than the analysts expected, and so your stock is overvalued.
The failing here is not that the stock price dropped on results that were worse than the market expected, it's that the market expected too much in the first place, causing the stock to become overvalued.
- ubernostrum 14y agoIf it happened once, sure. The thing is, analysts have shown, historically, that either: 1) They are really, really bad at their jobs to have such a consistent track record of producing poor estimates for Apple, or 2) They are really, really good at their jobs, but the jobs they're doing aren't the jobs we think they're doing.
- AlisdairO 14y ago> The failing here is not that the stock price dropped on results that were worse than the market expected, it's that the market expected too much in the first place, causing the stock to become overvalued. I don't really see how what I said disagrees with what you said - what I was pointing out was that a stock price falling when the company fails to meet expectations is good and rational behaviour. The problem is the bad analytics that caused the inflated expectations in the first place. Feel free to speculate as to the cause of that as you wish :-).