Unfortunately, when you are a well-owned growth stock, you can’t downgrade your growth expectations and avoid serious share price consequences. I have to say I was very surprised by the profit miss and guidance downgrade issued by satellite communications company Speedcast (SDA), yet I can’t be surprised at the 40% share price drop to what equated to 20% downgrades to consensus earnings estimates. In what are unforgiving markets, dominated by momentum investors, where P/E is also subtracted alongside earnings downgrades, the punishment for the crime nowadays is large.
The chart below overlays Speedcast consensus earnings estimates for 2018 on its share price. You can see the consensus earnings (red) had been in a steady upgrade cycle and the share price (white) had been following. This has now been reversed.