Linked by Thom Holwerda on Thu 19th Apr 2012 23:57 UTC
Microsoft "Microsoft beat Wall Street's profit forecast as personal computer sales held up better than expected, lifting its shares 2.5 percent after hours. The results buoyed optimism around the world's largest software maker, which is lining up a new tablet-friendly version of Windows for later this year and is looking to make a dent into Apple and Google's domination of the mobile market this holiday shopping season." Are Wall Street forecasts ever right?
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Not really a question that makes sense
by AdamW on Fri 20th Apr 2012 11:39 UTC
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"Are Wall Street forecasts ever right?"

That's not really a question that makes a lot of sense. There is no single 'Wall Street forecast'; there are analysis services which look at forecasts provided by dozens of market watchers in influential positions (widely used bureaux and the like) and average them out. Then they look at the company's published results and see if they're better or worse than the average of analysts' expectations. This isn't intended to tell you anything about _the company itself_ - if what you're interested in is whether the company is, in an absolute sense, doing well or badly, it doesn't matter what analysts predicted. What it does is tell you what the stock price is going to do. Traders factor analysts' expectations into their trading. If results are better than analysts' expectations - even if, _in an absolute sense_, they're utterly terrible - the stock price is likely to go up. If results are worse than analysts' expectations - even if, in an absolute sense, they're still fantastic - the stock price is likely to go down. This is because the analysts' expectations are already factored into the stock's price.

Reply Score: 3

vaette Member since:

I'll note though that the idea that analysts are failed prop traders has a lot of truth to it. After all, if they were genuinely good at predicting the market they would just trade on it and shut up. Still, analysts do have an educated basis for their predictions, you should just apply a generous helping of your own common sense as well. After all, what analysts say is based on publicly available information, and if you follow the news yourself you probably are in a just as good position to judge as they are.

Reply Parent Score: 2