Except Zoom's, which fell from 514 to 410 in less than an hour.
Really puts the nails in coffin of the whole "we're gonna work more remotely after the pandemic" narrative.
Really puts the nails in coffin of the whole "we're gonna work more remotely after the pandemic" narrative.
Zoom has been doing up ~500% this year. The large fluctuations are expected. Online learning/work will continue to grow regardless of a vaccine. It's not going to be in a crazy rate like it has been this year because of covid. I'm not even talking about companies, cause that's a no brainer. I'm talking about education and hospitals. For example, the convenience of having a virtual appointment is great for both doctors and patients and it's not going away no matter what.
My opinion about Zoom. Selling because of a vaccine is pretty stupid. You should sell if you think they are over valued and not be able to compete with the big companies long term. One thing to pay attention to is their future plans. If they don't have plans to expand their product line I would worry long term. There's no problem for a company to pay for Zoom for video calls and for another company for things like slack/docs etc. But when you have companies like Google/Microsoft who package and integrate everything together, and can give you a good price for it too, then it's a concern. Google/Microsoft make many subpar products, and this year zoom showed it nicely. But they keep copying the important features and will eventually close the gap.
^ check the pre-trading price
Zoom was 500 at close yesterday, in premarket trading it's dropped 13% to 435.
Nasdaq open at 1430 GMT
Because of day traders and HFT, it's hard to say how long your average investor holds a stock, but it's fair to say that some hold it for a long time and others "speculate" most of the time. The speculators probably have a greater impact on the movement of a stock, but over time it must move in line with the performance of the company.
The price of a stock is thought to be a "risk adjusted present value" of the underlying company. Even if you could be 100% sure a company would make X dollars per year in perpetuity, the price would not be infinite. Instead each year of earnings is "discounted" by risk, inflation rate, the cost of borrowing money, the value of competing investments, and other factors.
If it was assumed by investors that Zoom would make lots of money for the next 5 years, and then make very little money, and this news meant they would only make lots of money for the next 3 years, then that will have an impact of 2 years worth of discounted earnings immediately.
(of course it's not like Zoom pays or is planning to pay a dividends but there's still an underlying value, for instance they could be purchased by a larger company that does pay dividends.)
[1] https://www.reuters.com/article/us-health-coronavirus-short-...
Thanks for putting it so succinctly. I really hope someone who knows a thing or two about the efficient market hypothesis can elighten us a bit.
I really appreciate the guidance as I'm quite new to it. Especially so because you're enthusiastic about this book :D
When the defining event actually occurs, it will either move from $125 to $50, or $125 to $200.
So the news event in this example is priced in at $125, but there is still scope for big moves when certainty is realised.
Obviously in real life the values are never as certain. In the above example if the stocks ever trades < $125 before the event, you would make money in the long run.
EMH shouldn't be taken seriously as the market actors are compromised of irrational humans.
The same thing happened to Hertz, which even after declaring bankruptcy and almost certainly being worthless continued to trade at a healthy volume. In fact, Hertz tried to get approval to dilute and sell more shares to capitalize off the fact that people were buying their worthless stock.
When will one be developed?
How effective will it be?
Will it have any negative side effects?
How hard will it be to manufacture and distribute?
All of these are important questions that were hard to predict. Today's announcement sheds some light on possible answers to these questions, so this new information is being priced into the market.