🍨 Daily Scoop: Mad Financial Analysts
By Fri, Dec 6, 2019
The stock market moved up again but only slightly. For the second day in a row, there wasn’t much to move the market in either direction.
Beyond the overall market, analysts flocked back to embrace the stock of a beauty products retailer, as soon as they’ve realized they’ve made a big mistake last quarter when they turned their backs on the stock for missing their expectations. On the same day, they turned their back on a recent IPO that is building the future of information search only because it missed their forecasts and expectations.
Oh, and by the way, we wrote financial analysts a letter and called them mad — more on that in the “Water Cooler” section.
Also, don’t forget to scroll down to the “Overall Market,” “What’s Up?” and “What’s Down?” sections to read more.
Market Recap
- U.S. markets: All three indices finished Thursday in the green with the S&P 500 leading the pack with just 0.15% daily gain. Scroll to the “Overall Market” section to learn more.
- Cryptocurrency: Bitcoin’s price is hovering slightly above $7,000 mark. It looks like the same inaction in the overall market has crept into the crypto market.
OVERALL MARKET
Nothing happened for the second day in a row.
All three indices finished Thursday in the green, but only slightly. Throughout the day, the stock market didn’t move significantly. Slightly down, and then slightly up, and the biggest move ended to be 0.15% by S&P 500.
So, what happened?
It’s not clear what’s going to happen in the coming days and weeks as it relates to the economy and the trade war. On the one hand, there were glimpses of hope by China, indicating the negotiations are moving along. On the other hand, everyone is preparing for a recession. The result is a market that is barely moving and waiting to see what’s going to happen the next day.
SPONSOR
5G Stocks About to Get Red-Hot
Discover the 3 stocks set to produce returns as high as 3,217%. See for yourself before it’s too late.
WHAT’S UP
Satisfied analysts
So, what happened?
Shares of UltaBeauty (Ticker: ULTA) were up more than 9% on Thursday. The company announced its quarterly earnings report, and the company’s ability to sell high-margin, celebrity-led products helped it outperform analysts’ expectations. And, financial analysts loved it.
This came only after one quarter when the company delivered a lower-than-expected performance compared to analysts’ expectations, and the stock fell drastically on analysts’ disappointment at the time.
WHAT’S DOWN
Disappointed analysts
So, what happened?
Shares of Yext (Ticker: YEXT) were down more than 22% on Thursday. The company is on a mission to reshape the future of search and information retrieval for enterprises. And, so far, it has succeeded in convincing 1,766 mid-market and enterprise customers to pay for its technology. In the latest quarterly earnings, the company grew revenue by 30% year-over-year, and only barely missed analysts’ expectations for loss per share.
It would be interesting to see what happens the next quarter. Assuming that the company can manage to barely over-deliver compared to analysts’ expectations, will the same analysts flock back to buy the stock? We are ready to bet you, they will.
WATER COOLER
A letter to financial analysts…
What does that mean?
Dear financial analysts,
You are mad, we are convinced. You come up with an estimate of revenue and earnings for companies despite the fact that most of you have never run a company.
Then, you watch the company misses your estimate by a few cents and percentage points. Accordingly, you conclude that the company is not worth investing in, and give a sell recommendation.
One quarter later, and we are not joking, one quarter later, you again come up with estimates and forecasts. The company over-delivers by a few cents and percentage points. And, then, you flock back to buy the stock.
All along, nothing has changed about that company’s ability to grow, market potential, leadership team, customers…
The only things that happened in between are:
- You get paid a salary for your useless analysis,
- Financial media get people hooked and make money running ads.
- Billions of dollars are made in management fees by indices and ETFs that followed the analysis to move money out and back into that stock.
Tell us, if this is not the definition of insanity, then what is?
Sincerely,
Grumpy long-term investors
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
