RE: Are you saying that because the estimates were closer to the actual this time the company did something wrong? If so you are full of hooey.
I don't understand why this is so difficult to grasp; I must not be explaining myself very well.
The company did nothing wrong.
If the company comes in below expectations, that does not mean it did anything wrong.
I need to make a distinction between the STOCK and the COMPANY.
The Stock is expecting something to happen. In this case blow out EPS. Dell has a history of beating the numbers by a certain amount.
If DELL fails to live up to this expectation, as it did, then the stock is vulnerable to selling as disappointed investors sell their shares on the company not living up to their, in this case lofty, expectations.
This is why stock that consistently beat numbers get such high multiples. Everyone expects the analysts to raise the bar after every report. Over time, the bar is eventually raised to high and when the stock fails to live up to expectations, it falls.
DELL has managed to jump this bar for a much longer period than on average. Because of this, the stock is getting a richer and higher valuation and multiple. However, IF and WHEN they do miss, the failure may be that much more devastating.
With 45 cents being the actual whisper number, and consensus @ 42 cents, that would about equal DELL's historic norm.
@ 44 cents, the stock failed too truly meat the whisper numbers and is reacting accordingly.
If this decline develops into a larger decline, one could argue a case that big money is selling because they are loosing confidence in the stock ability to beat numbers in the next report.
If the pullback is muted, then this loss of confidence has not occurred. We won't know for a while. Be patient, the answer will be plain as day in due time.
In a nut shell,
Have you ever seen a company with great numbers and balance sheet in it report only to it's stock pummeled?
HWP comes to mind, their quarter was not bad by any measure, but it was expected to be much better. The stock is reacting accordingly.
Jim |
