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Whisper Numbers Make a Comeback
Saturday July 12, 2:01 pm ET
By Denise Duclaux

http://biz.yahoo.com/rb/030712/markets_stocks_whispernumber_1.html

NEW YORK (Reuters) - Whisper numbers are making a noisy return on Wall Street as investors demand companies blow past estimates to justify the double-digit run-up in share prices over the last four months.

"Even when companies make the numbers, it's just not good enough anymore," said Neil Massa, an equity trader at John Hancock Advisors.

Whisper numbers -- the unofficial profit figures that were bandied about Internet chat rooms and Wall Street trading desks at the peak of the bull run in the late 1990s -- are making a comeback after three years of a bear market.

The tech-loaded Nasdaq has leaped almost 35 percent since scraping out year lows on March 11, and investors are making bets that companies will top estimates as the economic outlook brightens.

"Whisper numbers are definitely not a new thing, but they are becoming more common lately," Massa said.

Internet media heavyweight Yahoo Inc. (NasdaqNM:YHOO - News) after Wednesday's close posted earnings that matched Wall Street's consensus estimates and hiked its forecast for the year -- only to see its share price skid almost 8 percent on Thursday.

Analysts raised concerns about the stock's value after the company's quarterly profit, which more than doubled from a year ago, met but did not beat lofty expectations. The stock has climbed about 99 percent in 2003 and rocketed almost 262 percent since bottoming out last September.

"The importance of whisper numbers kind of died down, but as the Internet becomes hot again, they could well become an important factor," said Safa Rashtchy, senior analyst at U.S. Bancorp Piper Jaffray.

Yahoo reported a net profit of 8 cents per share, meeting analysts' consensus forecast but falling short of the whisper number. Subscribers to Web site WhisperNumber.com had pegged Yahoo's earnings per share at 10 cents, hiking their forecast from 9 cents just five days ago.

REINFLATING THE BUBBLE?

The expectations that helped power the speculative technology bubble are inching their way back into the market now that companies are recording profits again.

"Now that the market is coming back, we are seeing a number of investors who haven't been on our site for quite some time -- who lost all their money back in 2000 and 2001 -- saying 'Reactivate my account,"' said John Scherr, co-founder and president of WhisperNumber.com.

Whisper numbers exist because most companies exceed Wall Street expectations, undermining the credibility of analysts' forecasts. Over the past nine years, about 57 percent of companies on average have topped expectations, 22 percent matched and 20 percent fell short, according to Thomson First Call (News - Websites). The number of companies surpassing estimates has climbed in recent quarters.

"In the early stages of most recoveries, you beat the estimates," said Chuck Hill, director of research at First Call. "It's not a case of companies low-balling estimates, it's the recovery going faster than anticipated. I wouldn't be surprised to see whisper numbers come back."

Some market watchers warn whisper numbers can be created by investors looking to manipulate share prices, but they all agree that the buzz number is a powerful force on Wall Street. A company that misses profit forecasts -- whispers or consensus -- by a penny a share can lose billions of dollars of market value in a matter of hours.

"Human nature is the same," Rashtchy said. "It doesn't matter how rich or sophisticated you are, you get caught up in it."