Whisper Number
Candlefocus EditorWhisper numbers are usually more optimistic than published estimates and serve as informal targets that traders may look to use as the basis of their trading strategies. They consider the unofficial number when trading on a stock, as they believe that this expectation is the consensus view among traders based on their knowledge of the company performance. A company’s official earning estimate may be in-line with or below the whisper number. If the official estimate is below the whisper number, then traders believe that the company could beat that estimate and the stock may act accordingly prior to the release. A stock price often will move towards or away from the whisper number before an earnings release.
Whisper numbers can however be potentially misleading, as rumor and speculation can drive them higher and distort the market’s view of a company’s long-term prospects and the real underlying value of a stock. A whisper number and resulting price movements don’t necessarily reflect the fundamental value of a stock or its actual potential to appreciate in value. This can become especially true if the news that accompanies a quarterly earnings report contradicts the whisper number. If a company announces higher-than-expected earnings but the stock falls, this is a sign that the whisper number was too high and a reaction to it was unwarranted.
Ultimately, while whisper numbers can create a buzz and a sense of volatility in the market, investors should be aware of the potential effect they can have in inflating the price of a stock beyond its real underlying value.