Why do some stocks fall on earnings beat?

I have noticed lately several stocks falling immediately after earnings beat expectations. Can someone please enlighten me?


After decades worth of investing, I still have no clue why stocks move up or down over the short term.


Some of the factors might be
forward guidance is less than expected
market expectations were higher
profit taking
valuation concerns (over valued)
broader economic conditions
institutional investors actions like rebalancing portfolios
short term volatility due to algorhythmic or high frequency trading

I can’t tell you how many times this exact thing has happened on something i own…doc


Hi @LisaM & @iampops5,

Actually, it is simple.

Wall Street has estimates that they publish and those that they hide, their secret estimates that they trade on.

They also want to take short-term profits when they can or when they “need to” based on quarters.

So when one of their companies “beats”, they will sell some.

Get a lot of funds doing that and the prices drop.

Does that help you?

All holdings and some statistics on my Fool profile page
https://discussion.fool.com/u/gdett2/activity (Click Expand)


Thank you, I was unaware of that. I may start selling part of my position before earnings to insure against this factor. I hate to miss a big gain that could happen after earnings, but when everything seems good and it bombs after ‘good’ earnings, it really discourages me.

well as the old saying goes “buy on rumours, sell on news”…


Gene and Doc make excellent and absolutely valid points. The difficulty I always have is predicting how different tickers react to similar news. I think even “experts” also basically “flip a coin” with how a stock will react, not to mention predicting how their earnings will play out. You are in good company.

I would twist things slightly in suggesting maybe you should think of what your approach is to trading and how it fits with earnings. What are your goals and PLAN for trading stocks. What I mean is that many traders (short term) make it a habit to never hold through earnings. Take the profit or loss before and re-evaluate after earnings. Longer term holders let it ride, assuming there will be a bump up or down and it won’t matter in the long run. Which side are you on? And it’s okay to be on both, let some stocks ride that you are committed to long term and dumping those that were short term plays to begin with. Or even trimming those you are uncertain about and letting a small amount ride.

Like all of us, you have FOMO and remorse to drops, decide which you handle better and make a plan ahead of time. You, like all of us, are NEVER going to be perfect and will have hits that indeed hurt. Deep breath, breathe through it and move on. If your plan is not working overall to the positive, then it’s time to reevaluate your plan. But if you rolled the dice with the reaction to earnings and it dropped, that’s life and move on. I should note, maybe I talk a good talk at times, but yes, I have moments of absolute frustration from things going South when I expected North. You, are not alone.

As another side thought, a lot of folks use options to make plays on upcoming earnings. If you have a hot stock and believe it will do well, there is often a build up prior to earnings. Often, options can be used for a gain with the buildup just prior to earnings. Simplistically, call options are purchased a few weeks prior to and then sold immediately before earnings release. Alternatively, folks make a planned play on some gap ups or down by awaiting the “rebound” and play options accordingly.

You are doing fine.



There is a writer / trader-investor I have read for years and deeply respect - Tom Bowley of Stockcharts and Earningsbeats.com. He posts and videos regularly about Wall Street manipulation of the markets. One of those manipulations being post-earnings drops. He strongly recommends as a general rule (not for everything), selling out of individual stocks closely before earnings and buying back after earnings +31d (assuming you want to stay invested in that stock.) He advocates for taking any profit and minimizing damage from a negative surprise - actual or just perceived. That said, obviously that involves fairly frequent trading and may not be practical for an individual, depending on circumstances. I follow that practice only because my holdings of individual stocks are usually less than 8-10.


I second the respect for Tom and EarningsBeats. You can go to Stockcharts TV/Youtube and look up a lot of his previously recorded comments to get a feel for his style. Plus I believe you can get one of their newsletters free. He has an interesting rational perspective on most issues.

Of course, then there are events you can’t easily prepare for such as Fitch downgrading of US debit.



Thanks Lakedog and FlyingCircus! I will go do some research on the EarningsBeats website. Sounds like just what I need. Also thanks for letting me know I’m not alone. I was just reading about the Fitch downgrade this morning. I guess that is putting a big damper on almost everything today.

1 Like