Human, there are a few things we can probably all learn
from.
1. We've under-estimated the strength of a technicals trend.
Once something is moving in a trend, there's a lot of inertia.
2. We've under-estimated their sand-bagging, in part fueled by
strength in areas that are hard for us to follow, e.g. F2P spending
in games like Simpsons which have surprising long-term success. It
used to be that NPD console game retail sales gave a huge insight
into revenue and earnings, now it's far less so.
3. Analyst support has been very high, and when I look at the
coming FY eps range I see the high and low analyst ests are
$2.51-$3.00, which is +6.75% and -10.7% from the average, which
isn't a very wide range. With TTWO, which admittedly is still to
give guidance for the coming FY, they are $0.75-$1.75, +31.5% and
-43.6% from the average. Is that all about the public visibility of
products, or is it also about the nods and winks over steak dinners
with top level execs? We discussed before earnings that BFH's
weakness wouldn't impact this FY because it was so late in the
year, and were the analysts so unconcerned with lack of BFH
follow-through into this FY because they already had the wink about
the sand-bagging? The problem with analysts support is it tends to
be as much of a lagging indicator as a forward indicator. They
often love a stock on the way up, and also on the way down, before
eventually throwing in the towel then starting to love it again
when it returns to higher prices.
4. We over-estimated the importance of all the insider selling
last quarter. There are times in the past when large selling by
many execs has portended earnings weakness, but not always, and not
this time.
5. Financial engineering. I noted pre-earnings the massive gap
between revenue and eps estimate relative to the year before, which
enabled an easy Quarter beat. There's also the buyback spending
(while insiders were selling).
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