I’m not saying this will happen, but I think it’s important to mention the possibility that it could. I promise I won’t take credit for calling it…
Nothing enrages the bears like the Beat n’ Raise Shuffle. It’s one of the most beguiling dances we do here on Wall Street, everyone knows all the steps even if they don’t know they know ’em. Once that B n’ R Shuffle music comes on, we fall into our syncopated routine like the cast of Boogie Nights during the ’77 montage.
Anyway, here’s how it goes. Last night Mastercard came out and suspended its full-year 2020 earnings guidance. It had just issued that guidance in the third week of January. Citing the outbreak of the virus and all the cross-border commerce and travel issues associated with it, they no longer want to be held to the number.
“Cross-border travel, and to a lesser extent cross-border e-commerce growth, is being impacted by the Coronavirus…If the impact is limited to the first quarter only, we expect that our 2020 annual year-over-year net revenue growth rate would be at the low end of the low-teens range.”
We’ll all forget the number. Wall Street will take their cue from Mastercard and other companies and bring their own estimates down. For Q1, Q2, calendar 2020, etc.
And then this spring / summer, when the virus is under control and the outbreaks subside, we’ll start to become desensitized to the headlines. Business will go on as usual. Flights will take off. Shipments will resume. And Mastercard will be back to what it does best – facilitating commerce. And when they start reporting quarterly earnings, they’ll get a pass. Q1 will be the asterisk quarter. “It’s a disappointment, but so what, we knew it was coming.”
And then these companies that cut guidance will eventually work their way back to the numbers they were originally supposed to do. But they won’t get a polite golf clap or a yawn. These originally expected earnings reports will be met with rapturous applause. New highs. Five percent pops after the close / before the open. A thunderous ovation just for delivering what they were originally expected to deliver. But now, instead of it being “in-line with expectations,” the media will report it as a beat! They beat!
And then after the beats come the raises. The lifting of guidance as companies got too cautious in the eye of the COVID-19 epidemic. And further price appreciation. Because we forgot what the original expectations were in the first place.
Don’t look at us! We’re just doing the Beat n’ Raise Shuffle! Put it on TikTok! Teach it to your mom!
And the bears…the bears f***ing HATE THIS. It’s so funny. I’m giggling a little as I write this.
Again, this isn’t in the bag. We’re not desensitized to the guidance cuts just yet. We’re not done being scared of the outbreak headlines yet. But that’ll happen. And then the slate will be clean for the “upside surprises” that weren’t upside surprises at all.