Shares sink when CEOs change the subject and move their targets

Study finds investors should be concerned when companies change the focus of their discussions

Here’s a trick to look out for as some of the world’s biggest companies, including Meta, Microsoft, Alphabet (Google’s parent), and Apple, report earnings in coming weeks: moving targets.

Moving Targets, a new study examining how executives talk to investors during earnings calls, warns investors should take fright when companies change the focus of their discussions.

For example, a company that has seen same-store sales growth for 16 consecutive quarters will mention this “intensively”. However, if it has a growth-free quarter, it will switch gears and “shift the conversation to another metric”, such as cost savings or R&D.

Importantly, markets appear to miss this simple deception, as there is no initial share price reaction. Instead, the deterioration in fundamentals is only gradually discovered, with shares in such companies badly underperforming over the following six to 12 months. In short, changing the subject of discussion is a red flag – a smokescreen hiding a slowdown.