I love this talk of "analysts". Did the "analysts" miss that Google just bought a struggling 10B+ Motorola? Do they expect it to be some magic unicorn that can turn Motorolas losses into Googles profits in a single quarter?
38 separate analysts, high estimate was $13, low estimate was $9.92. Average was $10.65, actual numbers were $9.03, so below even the most pessimistic analyst. That usually means the publicly available info just wasn't accurate, that something happened privately that only Google knew about.
Usually companies avoid this kind of thing by giving some mid-quarter update so that they can mitigate some of the damage.
Google actually provides no EPS guidance at all though, which also caused problems with a big miss in January 2012. Analysts like to have something to work off of.
"What _is_ a Wall Street analyst, and why are such considered credible?".
He made the assumption that these analysts didn't do their job well, and that he in fact knows more about Google's financials/operations than they do.
The "programmer" remark jmduke made is just an assumption based on the fact that nearly everyone that uses this site is a programmer of some kind.
Programmers are not immune to that failure mode, but programming culture encourages data-driven decision-making and prizes empirical results.
Software engineering can involve difficult models about different scaling scenarios. Civil engineering might involve unexpected surprises about how standing waves emerge in bridge design. Financial analysis involves a forecast of the total revenue stream the company will generate between now and the end of time, and a guess about what other market players will predict about the future a quarter from now, since the stock price, too, can affect its income.
Take P/E ratios for example. Should you look at them as a sanity check, or think of them as a broad measure of the market's beliefs about the issue's future growth potential?
Regardless of where you stand, it is patently absurd to state that financial analysis is not data driven, and the decision making does not reward empirically successful results. Whether you recommend your fund bets with or against the market you get less of a say next time when you have less money left to bet, or decrease your assets under management by losing your clients' money.
[1] http://fivethirtyeight.blogs.nytimes.com/2012/09/09/why-weat...
You have to be kidding.
Actuarial work, bioinformatics, social science. These are data-driven cultures. They actually require scientifically valid and methodologically sound data to make a claim.
Programming, on the other hand, is dominated by fashion. Language wars, methodology wars, business bullshit, buzzword chasing. Programming is not data-driven AT ALL! When was the last time a computer scientist actually did some SCIENCE? When was the last time a programmer actually ran a double blind study?
99% of programming is not data-driven whatsoever. The sweeping decisions in programming are made by corporate big wigs operating on their intuition, or are design choice (extremely subjective!) made by "architects" who, for instance, created UNIX.
Were the people who created Python, Ruby, Java, C, etc DATA-DRIVEN? What studies did they use to decide that so-and-so feature should be like this and not like this?
Programming is mostly a craft and has essentially nothing to do with being data-driven. Doing A-B tests does not mean your culture is data driven when A-B tests are like 0.1% of everything you do. And most A-B tests are methodologically unsound anyway and would be shamed out of any real social science department.
Economics, on the other hand, is an actual science with actual data that performs actual methodologically sound studies using advanced statistics. Practicing economists have to use actual valid data procured from real studies to have careers. Programmers mostly twiddle their bits around until something works. That IS NOT being data driven.
Programming is NOT a science.
There's a lot of derision because the profession of stock analyst is about equal to Snake Oil Salesman.
It's an aggregated consensus of short term future earnings best guesses. It is assumed that these expectations are "priced in" to the stocks's price. When a company releases earnings and "misses", there is an adjustment to the share price.
I have often suspected that one of the things that drives PG was this generalization that programmers by their very nature don't understand how business works and therefore don't need a seat at the business table. It's always better to be breaking down stereotypes rather than playing into them.
Yes, and this or something near it is a fact (http://business.time.com/2009/04/20/breaking-news-mutual-fun...). Although the underperformance typically comes from management fees, because we would expect mutual fund portfolios to average with the market. But then you have to pay the managers and analysts.
Generalizations are OK when they are true and backed up by scientific data.
A stock-based mutual fund might actually be doing its job if it is simply not losing money when the dow surges since it's goal might be diversification via non-correlation by long-shorting the market.
There is of course some truth to the fact that mutual funds often do not earn their fees. But simply saying they cannot "beat the market" overlooks important questions about what those funds actually set out to do in the first place, and what their respective risk-taking philosophy was.
Of course, please perpetuate this nonsense, as it makes life easier for those of us who are investing relying upon it.
Most analysts are not Warren Buffet, or even close to it.
My favorite example: Costco. I love Costco, shop there all the time, the CEO is Mr. Fantastic as far as giant corporate CEOs are concerned in my book. Cashiers make too much money there, according to analysts. (Quoting from Wikipedia, but originally from the Houston Chronicle)
In an interview published in the Houston Chronicle on July 17, 2005, he told Steven Greenhouse that he was not interested in Wall Street analysts who took issue with his care for employees and customers rather than happier shareholders. Investors might want higher earnings, but Sinegal stated, “We want to build a company that will still be here 50 and 60 years from now." A favorite saying of his is “you have to take the shit with the sugar”. Investors who bought $10,000 of Costco stock in 1992 had $43,564 ten years later, a return of 354% (or 15.855% annually).
So it's not just "Computer Programmers" who are skeptical of stock analysts. I have a minor in Mathematics, I can compute earning ratios just as well as the analysts. I don't paint them with a broad brush because I know little about what they do, I paint them with a broad brush because I know A LOT about what they do.
And what they do is akin to "reading the bones", unless they have insider information, based on past performance. I mentioned Buffet before, but he only makes decisions when he's almost certain(and still stometimes wrong) he knows about he company he invests in. The talking head analysts I see have no such certainty requirement.
So I suppose you are an Analyst?
Try "the intelligent investor."
He's not trying to figure out what exact earnings-per-share are going to be for companies every quarter. In fact, he was trying to discourage companies from giving earnings guidance.
But yes, your point he isn't what we think of as a typical 'analyst' is correct.
There will probably be at least a few analyses published in the next few days claiming this miss was "obvious" for various reason, all with the equal benefit of hindsight.
If you can consistently identify things which analysts and those who follow them are prone to overlook or fail to comprehend, there's all kinds of money to be made.
Personally, I've had some great successes putting money behind my own predictions.
There is no bigger industry on the planet than the financial industry. That means a ton of money flowing around. There is far more sophistication there than you give it credit for.
Care to disclose your position and total profit raked in on betting against those analysts? Stock market opinions are kinda cheap otherwise.