Many investors are constantly wondering why stocks fall after company earnings reports are released, especially when the performance is positive according to the report. The question has various answers, which can also influence each other. Understanding these market mechanisms gives investors the opportunity to invest in a more targeted manner and be better prepared. Below we list some reasons for such events:
If a company has performed better than it should in the past quarter and this is shown in the reports, this can be a reason why a share price falls. How can this happen? When companies report good news, they often compensate with weaker forecasts for the coming quarters or years. This process can lead to false optimism in the market, which can ultimately mean a decline in stock prices. It is important for investors to look beyond earnings reports and assess whether companies are improving or deteriorating overall in order to make more long-term forecasts.
If a company publishes its reports and the results are worse than expected, this is often a sign for investors to keep their hands off this share. This is because a lack of profits is often a sign that a company is in trouble. For example, if a company is making significantly less money than analysts predicted, this will likely lead to a decline in its stock price. According to research by S&P Capital IQ, a whopping 82% of all stock price fluctuations following earnings announcements are due to actual results versus expectations.
Both internal and external news and events can cause a company's investor sentiment and share prices to change. For example, if a new product is reported by internal sources, there is a high probability that the share price will increase. An example of an external factor, would be if the Chinese economy weakens. If we then look at the share prices of a company that exports a lot to China, there is a high probability that the share price will fall.
For example, new regulations that change how companies are taxed or require companies to disclose their financial performance in detail often lead to a decline in stock values. This information is mostly public, which could lead investors to make different decisions about where to invest their money.
Investor sentiment is incredibly important to the stock market and can often be the deciding factor in whether a stock rises or falls. If investors are confident in a company's future prospects, they are more likely to buy the stock at the current price, while if they believe the company's future is uncertain, they are more likely to sell their shares. The release of reports now can cause investor sentiment to change. It is important to keep an eye on such changes so that you can invest more accurately.
When general economic indicators develop negatively, this is often a sign that share prices will fall. This can also be related to a recession or a bear market. This is because, when overall share prices fall, investors often become more risk-averse, which again leads to share prices falling.
After a company releases its quarterly report, many investors look for signs that the company is doing well. However, unexpected problems can arise that cause the share price to fall after the reports are published. In some cases, the impact can be much greater than expected. For example, Toyota's recall of millions of cars in 2014 led to a decline in the share price after the reports were published. The recall resulted in a $30 billion drop in Toyota's net income, and the company's stock price fell about 20% as a result. In this case, investors sold their shares even though the company's reports were actually good.
Share prices often fluctuate after the publication of results because investors are concerned about the competitive pressure exerted on the company. This is particularly true for companies that are considered leaders in their respective industries. Many of these leading companies are under increased pressure to keep up with their competitors, which could lead them to make decisions that are not in their long-term best interest. That's why it's important for shareholders to pay close attention to earnings reports and make sure they know how the company compares to its peers. If a company performs poorly compared to its peers, there is a high probability that the share price will fall as a result.
Many investors also make their own assumptions about how the stock market will develop in the future. If investors now suspect a dip or retracement of the share price based on their own feelings or on the analyses of experts, they sell their shares to avoid the dip. Often, investors then try to buy as many shares as possible during the dip, ideally during the low point, in order to have made the highest possible profit in the long term when the price has returned to normal. For this reason, stocks usually fall after earnings reports; investors sell stocks to buy them again at a later date.
In summary, a company's share prices often fall after the publication of its earnings report. This is because the market is looking for a reason to sell those shares, and a poor earnings report can be considered such a reason. Some analysts believe that this volatility after the release of earnings is simply a result of information overload and will not have long-term consequences for the stock market. In the end, as always, it can be concluded that you should be informed, keep an eye on the market and make decisions on your own.
Attention: This is solely the opinion of the author and not investment advice!
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Inhalt Puh, Börse ist doch nicht „e wie einfach“ Das KGV, KBV, KUV und wie die ganzen Kennzahlen heißen, ist für jeden Börsenneuling
Inhalt ist eine Anlagestrategie, bei der Anleger Aktien von Unternehmen kaufen, die regelmäßige Dividendenzahlungen ausschütten. Das Ziel dieser Strategie ist es, ein regelmäßiges
Inhalt Viele Anleger fragen sich ständig, warum Aktien fallen, nachdem die Ergebnisberichte der Unternehmen veröffentlicht wurden, besonders, wenn die Entwicklung laut des Berichts
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