funny you mention that..i just finished my initial analysis of Google. It appears as though the earnings are a little harder to hit this time. My calculations show that goog needs to report somewhere around $2.104 billion in revenue, or a 33.24% increase over last qtr. In the last 3 qtrs, GOOG has increased revenue 14.00%(Sept), 10.18%(Jun), and 21.80%(Mar). This makes me a little skeptical come earnings report time. Goog will still grow, I think only around 20-25% max, which utimately is only about $1.50 - $1.63 EPS...not the expected $1.73 EDIT: However, I am currently long in google
I understand what you are saying, about post-ER price predictions. However, I think that there can be some expectations based on previous post-ER reactions and ratios involved. Using the ratio of post-er price movement in comparison to the earnings surprise amount, you can come up with the degree of post-er price change based upon the surprise. So i guess what i'm getting at is when looking at past qtrs ER action, you can determine (roughly) what the best approach might be.
the way I trade them is that if the stock gaps up after an ER, I buy them and hold them for 3 weeks. very simple but effective. how do you guys trade the price action ?
RunTrade As others have noted, trading through earnings announcements can be a risky business. I trade positive earnings surprises at the open of the session following announcement. I've found is works best with higher price/higher volatility stocks. I go long on NYSE stocks and short on NASDAQ stocks. If there is raised guidance with the surprise I'll go long on NYSE and NASDAQ stocks. This approach has worked reasonably well over the last several years (+200 odd points). Recent examples are GOOG short (21 points from Feb, Apr and Oct trades), HAR long (15 points from 1 trade in Aug). Alas I have my fair share of stopped out trades, but it is worth persevering with.