A company announces earnings that beat the estimate, but the stock drops. How is this possible?
- The earnings call is when a CEO explains the earnings report and what to expect for next quarter.
- Companies use the call to highlight successes or calm fears, depending on the situation.
- They answer questions from investors and analysts.
When companies announce earnings, they conduct an earnings call where the CFO and/or CEO explains why earnings came out the way they did and what to expect for the next quarter. They also answer questions on the call from investors and analysts. Remember, the analysts are already trying to make predictions for the next quarter!
- Public companies are required to file written reports with the Securities and Exchange Commission (SEC).
- The SEC protects investors by regulating companies and the stock market.
You know how you get report cards when you’re in school? If you’re a public company, you have to file a written report with the SEC every quarter. It’s called a 10-Q, and here’s what one looks like:
- Every year, companies hold a meeting for their shareholders.
- Investors get to ask questions and vote on things like board members.
Most companies hold an annual shareholders meeting. If you’re a shareholder, you can attend and actually see the CEO in person!
- Cost basis is a fancy name for the price you originally paid for your stock.
- It is used to calculate the money you made or lost for tax purposes.
The cost basis is the original value you paid for any investment, adjusted for stock splits and dividends. So if you buy 10 shares of AAPL at $150 per share and pay an $8 trading commission, your cost basis is 10 x $150 + $8 = $1508.
- Stock is ownership in a company.
- Stock is sold in units called shares.
- A person who owns stock is called a stockholder or shareholder.
When you own stock, you own a small piece of a company. Stock comes in units that are called shares. A person who owns shares of stock is called a stockholder or a shareholder. Companies are typically divided into millions, tens of millions, or even billions of shares. For example, Facebook (FB) is divided up into 2.35 billion shares.
- To own a piece of a company you believe in
- To make money
When you own stock, you own a piece of the company. This means you own a share of the company’s profits and assets. It also means you have a special relationship with the company that other people don’t have. You even have a say in how it’s run because you can vote, attend shareholder meetings, and more.