forbes.com
Alphabet's Earnings: 55% Historical Probability of Positive One-Day Return
Alphabet's upcoming earnings announcement on July 23, 2025, is anticipated to report higher earnings and revenue than the same quarter last year; historically, Alphabet's stock has shown a positive one-day return in 55% of instances post-earnings, with a median gain of 4.8%.
- What is the historical probability of a positive one-day return for Alphabet's stock following earnings announcements, and what are the implications for event-driven trading strategies?
- Alphabet's stock has historically shown a positive one-day return 55% of the time following earnings announcements over the past five years, with a median gain of 4.8%. The upcoming earnings announcement on July 23, 2025, is expected to report $2.18 EPS on $93.73 billion in revenue, exceeding last year's figures.
- How does the correlation between short-term (one-day) and medium-term (five-day and 21-day) post-earnings returns influence trading decisions, and what strategies might traders employ based on this correlation?
- This positive historical trend suggests a potential short-term opportunity for event-driven traders. However, the correlation between one-day and longer-term returns (5-day and 21-day) varies, impacting trading strategies. Over the past five years, the correlation between one-day and five-day returns is 0.67, while the correlation between one-day and 21-day returns is 0.45.
- Considering the varying correlations between short-term and medium-term returns, what are the potential risks and rewards of different post-earnings trading strategies, and how might traders mitigate those risks?
- Future trading strategies should consider the relatively stronger correlation between one-day and five-day returns compared to one-day and 21-day returns. This suggests that short-term post-earnings movements may be more predictive of the subsequent five days than the following three weeks. Traders should assess the immediate post-earnings reaction to inform their five-day trading decisions.
Cognitive Concepts
Framing Bias
The article frames the information in a way that emphasizes the potential for profit from trading Alphabet stock based on historical earnings data. The inclusion of alternative investment options like the Trefis High Quality portfolio is presented as a less volatile, but still profitable, option. However, this framing might lead readers to focus more on the potential gains rather than the risks involved in stock trading.
Language Bias
The language used is largely neutral and objective, using terms like "favorable," "positive," and "negative" returns. However, phrases such as "potential gains" could be considered slightly promotional, potentially influencing readers towards a more positive outlook.
Bias by Omission
The analysis focuses heavily on historical stock performance data and omits discussion of other factors that could influence Alphabet's stock price, such as macroeconomic conditions, competitive landscape, or specific news events. While acknowledging limitations of scope is mentioned, a more thorough discussion of potential omitted factors that could affect the stock price would improve the analysis.
False Dichotomy
The article presents a false dichotomy by suggesting that event-driven traders only consider pre-earnings or post-earnings positioning. There are likely other strategies employed by event-driven traders that are not mentioned. The simplistic eitheor framing limits the scope of the discussion.
Sustainable Development Goals
The article discusses Alphabet's (Google's parent company) strong financial performance, including substantial revenues, operating profits, and net income. This indicates positive economic growth and contributes to decent work opportunities within the company and its related industries. The projection of continued growth further strengthens this positive impact.