Google reports; stock falls; let the pundits begin

Ramit Sethi · January 31st, 2006

A few days ago, I wrote about Google and all the crystal balls people use when earnings are going to be reported:

Oh no!!!!! Is the Internet advertising market over? Or is it just a slight correction??

I don’t know, and neither does anyone else. I just want to point this out: When Google releases its numbers on January 30, the stock will either go up or down. And about 20 minutes afterwards, the pundits will start to talk as if they knew exactly what was going to happen…

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Think about this today, January 20: Nobody knows a damn thing about what’s going to happen in 10 days. But stay tuned, because it’ll be hindsight bias at its best.

Well, the earnings are out. Despite having a monster quarter, Google (GOOG) fell short of analyst expectations and its stock is (currently) down over 16% in after-hours trading.

Here are some screenshots of news coverage.

I don’t have pundit reactions yet, but send them to me when you see them and I’ll post them here.

* * *

Incidentally: As I noted before in When do you sell a stock?

Sometimes, when other people sell stocks en masse, they can become immensely attractive because of this short-term stupidity. Refer back to my example of how Ebay dropped 20% in one day because they missed expectations by a penny. If on that day you still thought Ebay was a good fundamental investment, you could have bought it for a discount price.

Disclosure: I bought Google in after-hours trading today.

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  1. Jennifer

    Here’s my prediction: we’ll see a lot of sour faces this coming April from middle aged people with higher incomes who bought goog in Oct. and now have to pay the higher capital gains taxes because they went for a quick sell. Do you think they’ll demand another tax break this coming election?

  2. How did you trade in after-hours?

  3. Nice call on the Google buying, I think. In the long run, Google should be fine, but theres always a little panic.

    Great blog, and I love reading your stuff!

  4. TechnoBalance

    post-market -17% on GOOG, can’t wait to see pre-market 1st of February 2006 at NASDAQ

  5. Ramit Sethi

    Pduan, some brokers let you trade after-hours. (FYI, there are more risks and sometimes more fees.) I use ETrade and I did it through there.

  6. Ricky Patel

    I’m fairly new to actually investing in the stock market. I own GOOG shares, and had made roughly 35% gain on them. I knew they were going down(not that much). However i kept them, because I think Google is a great company and a long-term investment. But when you are making 35% should i take my profits? So i guess my question is what determines if you should keep a stock for long vs short term?

  7. I bought google back in 2004 and bought some more this morning after the huge decline. Though I’m not surprised, it’s amazing how quickly and easily people’s preception of a company can change! (BTW, great blog. I put your link on my blog.)

  8. Gualberto Daiz

    Nice trade afterhours. I was going to pick some up myself, but decided I would wait the next trading day for the options. I wasn’t able to fill on my order yesterday, but I personally see it as a non-event 48 hours later. The stock is back over $400. Wall Street will fall back in love with it in two weeks, and we’ll be testing 500 in 6 months at the latest.

  9. glennward

    Expecting google to outperform, I bought one call on GOOG, FEB/510 for $17.20 in the leadup to the Q4 announcement last night.

    That was stupid. Now, the call is bouncin’ around $5.60 or less, and I’m wonderin’ if I should just cut my losses here or stick in it, hoping people wisen up next week.