Netflix announced yesterday that it lost 970,000 subscribers.

The stock skyrocketed.

But wait, shouldn’t the announcement of bad news make the stock price go down?

No.

This was great news!

Netflix previously projected losing 2 million subscribers in Q2. So even though they lost almost 1 million subscribers, they still beat expectations.

Beating expectations means the stock goes up.

Why?

Because the lower stock price was based on the assumption that Netflix would lose 2 million subscribers. It was already “baked into the price”.

Once we realized that assumption was wrong, the stock needed to course-correct.

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Bottom Line:

The stock market is forward-looking.

Stock prices are based on future expectations.

If you read an article yesterday, it’s too late.

That news is already reflected in the stock price.

I see newer investors get tripped up by this. Stock prices are constantly and immediately getting re-priced based on new information.

That hot tip article is old news.