In some cases, even if the company reports profit in its earning report, the stock proce falls. What may be the reason behind this?
A closer look at the quarterly results reveals that, while profits rose, revenues declined pretty sharply for Goldman Sachs. In a case such as this, investors chose to see the glass as half empty rather than half full, so to speak. Think about it like this…..profits are actually the easier thing to produce. A company can cut costs, lay people off, and sell off unprofitable divisions very easily. These things would all make profits look better. The one thing a company can not do easily is increase sales/revenue, and that’s where investors get concerned. Goldman can only cut costs for so long before it has a negative impact on the overall performance of the company. Given the choice, investors would rather see higher revenues and lower margins, than higher margins with lower revenue. In this particular case, we may also be seeing some profit taking. GS went from 66 to over 90 in a six month period, and the people who bought it at 66 were waiting for a cance/reason to sell it. More ofte
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