Re: Why I don't understand Wall Street
> WTF? Really? So it seem performance as far as share prices go is to simply achieve or surpass the targets set by the pundits?
That (common) comment there shows a a complete misunderstanding of how the sharemarket works.
The price of shares at any point in time prior to a new announcement is based on the previous announcement.
If, say, in June the company announces an interim forecast that their EOFY results in 6 months time will be $10B profits, the buying and trading of shares from that point onwards are based on the $10B profit forecast. The share trading price is based on the forecasted - but not yet realised - value of a $10B profit. Therefore in 6 months, the second before the announcement of the results, the value of the shares are still based on the forecast of a $10B profit. If the company then announces a $5B profit - still a huge profit, but half of what they said they were going to make, therefore the share price immediately dives because the value of the shares has declined from what a $10B profit would have been worth (much higher dividends for example) to what is now a less valuable company, $5B dollars. Therefore the shares fall to a $5B-profit company valuation level rather than the forcast of it being a $10B profit company. There is also the factor that in addition to the valuation (in profit terms) falling by $5B dollars, there's also a further reduction due to a loss in confidence of the management who forecasted $10B profit, they were wrong, they aren't good at their jobs, what else are they wrong about?
The converse is true as well. If at that interim forecast they declare they'll lose $10B, the trading of those shares are based on a $10B loss. If 6 months later they reveal a realised $5B loss, of course the shares go up, because even though it's still a loss, it's a smaller loss than forecast, therefore the company, and its shares, are actually more valuable than they were 1 second before the actual results were announced.
The price of shares is only as good as the last announcement, whether that announcement was positive or negative, a forecast or a realised results announcement. Therefore when the next announcement is made, the share price fluctuates based on the difference between the price due to the previous announcement vs the price they should be based on results of the current announcement - either up or down.
There is a caveat to all this of course, as while this is the general case, individual companies shares or even industries could go mad due to loss of rationality and becoming, for example, a meme stock like GameStop or a personality-cult stock like Tesla. While mostly the share market is reasonably rational, it is still run by humans who are subject to various human foibles like confidence, overconfidence, irrational decisions, etc.