When Teradyne (NASDAQ:TER) claimed fourth-quarter earnings very last week, the effects had been superior than expected. Income grew 16% 12 months more than year, although earnings for each share popped 25%. Each top rated and base line were being better than analysts’ consensus estimates and exceeded management’s sturdy forecast — but the inventory fell 13% in the days subsequent the report.
In this clip from Motley Fool Stay recorded on Jan. 28, Idiot.com contributor Dan Caplinger addressed the seeming contradiction.
Dan Caplinger: Yeah, I’ve been looking close to, there is a dilemma from Brad on Teradyne (NASDAQ:TER). I was wanting up some quantities really fast right here and striving to see what could be likely on.
Brad says, “Appears like Teradyne documented good quarterly financials. Glance quite very good to me, but inventory is down 7.5%. Do you see some thing in the quantities that justifies the price likely down? Is it great prospect to get the dip?”
Brad, all over again, I am totally on the fly right here. Did not see everything in all those numbers specially that offers me a total large amount of pause, but I will just observe, I took a search at the share value. We’re up from $75 bucks a share in September. We nearly doubled. We almost hit $140 in late January, just a week-and-a-half in the past. Now we’re just down to $120. We are still up 50%, 60% from in which we have been 4 months in the past.
I think this is the risk, and it’s not just a Teradyne issue, it truly is an every thing factor. The risk of saying, “The corporation launched earnings and the stock did X in response on that day.” What is the relationship?
A whole lot of time, there is no relationship simply because it is the completely wrong time frame to be looking at it. Folks glimpse ahead to finding out those people quarterly effects, they include 3 months. For 3 months, men and women are speculating and the stock is transferring about what is heading to come about in these a few months.
At last on the working day, you locate out what they response was, and it truly is like, if you say, perfectly, folks need to have been let down since the stock is down 8% today. If it was up 70% in four months and now it’s only up 60%, well, they’re however undertaking anything correct due to the fact they are up 60%. It is really just that they had been down 8% these days. Preserve that in intellect and don’t read through much too a lot into the stock price tag actions.
The shorter-term factors, if something that this GameStop (NYSE:GME) point has taught you is there is a good deal of things likely on in the market that isn’t going to have anything to do with fundamentals of the business. If you enable it distract you much too a lot, it can get you out of a situation that you seriously like due to the fact it is going to serve you properly in the extensive run.