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Changing Expectations

Investors expect that the stock they purchase today will be worth more at some point in the future. Exactly how much more is determined by investors’ expectations of future performance. Every quarter, many companies follow their earnings releases with guidance for the upcoming quarter and full year. The new information is used by investors to recalculate their estimate of what the company is worth. This could lead to an increase, a decrease or no change at all in share price.

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