Whisper Number
A whisper number is an unofficial, unpublished earnings per share forecast commonly used by professional traders and fund managers on Wall Street. This term can also extend to any anticipated news or data release across various markets.
Key Takeaways
- A whisper number represents the informal consensus among insiders about an upcoming news release or financial result.
- It often deviates from publicly available analyst forecasts and has a notable influence on market prices.
- Understanding the dynamics between whisper numbers and official forecasts can provide critical insights into market expectations and potential surprises.
Understanding the Whisper Number
Traditionally, analysts prefer to hover close together in their forecasts to avoid the career-threatening embarrassment of an outlier prediction. While official consensus estimates offer a safety net by providing a collective voice, whisper numbers serve as the unspoken truth of actual expectations. They indicate what financial experts really think but might be hesitant to publish for fear of standing alone in their judgment.
The Efficiency and Risks of Whisper Numbers
Whisper numbers can be a potent tool for anticipating an earnings surprise. They reflect the sentiments of those who have their ears closest to the ground—often individuals with access to the nuances of company performance not captured in official reports. However, the accuracy of whisper numbers is debatable; if they sway far from consensus estimates and prove incorrect, they can lead to significant market adjustments. This volatility demonstrates how high the stakes are when trading based on these figures.
Myths and Questions Raised About Whisper Numbers
In eras past, whisper numbers were almost mythical figures passed down from stockbrokers to their top-tier clients, providing an edge in a less regulated market environment. Modern regulations like Sarbanes-Oxley have curbed such selective disclosures, changing the nature of whisper numbers. Today, they are more often generated from the aggregated views of various online platforms and even discerned through social media trends rather than secretive broker whispers.
Real-World Application
Consider the example where Apple Inc. (AAPL) is unofficially expected to post earnings of $5 per share at the next report according to the whisper number, while analysts’ consensus stands at $4.75 per share. The reaction of the stock price to actual earnings relative to both these figures can significantly differ, illustrating the practical impact whisper numbers hold over market movements.
Related Terms
- Earnings Per Share (EPS): A portion of a company’s profit allocated to each outstanding share of common stock, serving as an indicator of a company’s profitability.
- Analyst Consensus Estimate: A mean rating from several analysts on the expected performance of a company, typically in terms of EPS or revenue.
- Market Sentiment: The overall attitude of investors towards a particular security or financial market.
- Earnings Surprise: Occurs when the actual earnings reports differ significantly from the consensus estimates, affecting the stock price.
Suggested Books for Further Studies
- “The Psychology of the Stock Market” by G.C. Selden
- “Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports” by Howard M. Schilit
- “The Little Book That Still Beats the Market” by Joel Greenblatt
Whisper numbers remain a fascinating aspect of financial markets, embodying the clandestine yet impactful nature of trading based on privileged insights. Whether steeped in reality or part of an elaborate market psychology, they are undeniably a force that moves markets.
