Chowder, I understand and accept that it is about the guidance, but stand by my original reaction -- anybody who sold at 4:05 on that earnings report is nuts.
(1) The print was excellent, top line and bottom line, both in terms of growth and relative to analyst expectations.
(2) The numbers were strong across all divisions. Only takes 15% earnings growth to justify the current share price, and they are topping that easily.
(3) Sometimes shares will rally into earnings in anticipation of a great report, then "sell the news". In this case MSFT is down 5% over the last week, very clearly not the case.
(4) The guidance had not been issued at that time, just the earnings print
So what happened?!? We had a company with a rich-but-not-excessive valuation, down 15%+ from a recent peak, turn in a double beat against HIGH expectations, and.... the shares sold down because the outlook that hadn't yet been issued MIGHT disappoint?!?!?!?
If you have sufficient confidence in a company, you buy ahead of earnings. When I saw a weak company like IBM show solid cloud growth last week (it may be a good buy but only because valuations are so low), it was clear to me then that MSFT was going to turn in a blockbuster. Texted my brother yesterday to alert him of the upcoming earnings, and he added 150 shares to his position. I added AMZN yesterday on similar logic. I don't believe I need to see the earnings report to know their trajectory.
But when a tremendous company firing on all cylinders trades down 5% on the week, and then another 5% on a blockbuster earnings report, just because the outlook MIGHT not be that strong, this is a sign of a market that lacks confidence and is looking for reasons to sell. That's why I said this is feeling like an impending bear market. Valuations are still pretty high, and confidence is shockingly low.
I can't add to MSFT without finding a way to trim my AAPL position (both are already very large), and I can't sell AAPL without paying capital gains tax on 400%+ gains. Which might almost be worth it, except that AAPL is almost as strong a company as MSFT. So sadly I wasn't able to participate on that one, but not from a lack of confidence.
Shares are up in the premarket, so I guess the outlook wasn't a disaster? As if anybody really expected it would be? |
