Profit Warning

You own a stock. If you're long it, you do not want to wake up to this news headline.

When a company issues a profit warning, it means that their Street guidance is...wrong. It was too optimistic. They had guided to 52 cents a share in earnings this quarter and $2.10 for the year. But now the company is warning that their profits will be less: only 40 cents this quarter and $1.42 for the year.

Ouch.

So the stock goes from trading at like 26x that $2+ number or $54...all the way down to being indicated at open $22. That hurts. A profit-ectomy.