We've got long notes tonight on the big capitalization disappointments, which include some Action Alerts PLUS stocks. We've been working overtime to get the right story out on each, but let me just give you some general observations on the evening as I see it.
First, there's been no real sea change. We've seen this movie before, except we haven't seen it play out multiple times in the same theater in one evening.
Think about it: Alphabet (GOOGL) has been notorious at giving guidance. Then we got spoiled by CFO Ruth Porat's arrival and she made us feel more at home with the numbers. It had been selling at only a slight premium to the S&P 500 before she got there and she had lent a level of stability to the situation that gave investors enough comfort that the price-to-earnings multiple expanded. Now it will shrink as numbers get cut, so I suspect we will get price targets reduced and even some downgrades. It's the least optimal of the evening.
The others? I look at them as functions of both the fact that they have run so much and that I think the CEOs felt pressured not to go nuts to the upside because there's become no payoff to that whatsoever.
Sure, when you have a ServiceNow (NOW) today blow the doors off the numbers, you can't keep the lid on the stock. Expectations are going to go crazy no matter what.
But Starbucks (SBUX), Microsoft (MSFT) and Visa (V) all have it within their power to create a new bar of expectations, and none of them chose to do so. None of them decided to put a gun to their heads for the next quarter, and I would think all of them knew exactly what they were doing when they chose not to get Wall Street overenthused in what remains a tough environment. (Alphabet, Starbucks and Visa are part of TheStreet's Action Alerts PLUS portfolio.)
Or let's look at it like this. Starbucks came in at around $60. It's fallen to $57 because of a couple of numbers that were hard to understand: the actual European number, which didn't include systemwide stores because of an oddity involving the way the comp is calculated, and Asia, which looked like it was brought down by a new reporting method that included Starbucks-owned Japanese stores but is actually doing better than expected because China is accelerating.
In other words, there was no real disappointment.
But let's say people figure out the European conundrum and dissect the Japanese oddity. I still think the stock would be hit because it wasn't a ServiceNow, or an Under Armour (UA), for that matter, to mention another company that really couldn't hide its upside. (Under Armour is part of TheStreet's Growth Seeker portfolio.)
However, and this however is as big as it gets, if Starbucks' stock had come in where it went out, had it been at $57, I bet that on this same set of numbers it would have actually traded higher. That's right, it would probably have gone to $58, maybe $58.50. Not more than that because you didn't get the must-have "beat and raise," but it would have rallied because in the end it was a darn good quarter, and that's what matters.