Why Expectations Matter: Why stocks fade positive results (and one example)

Tue 27 Jun 23, 1:05pm (AEST)
risky risk bearish fall
Source: iStock

Key Points

  • Even the most upbeat announcements can trigger a selloff if its not in-line with market expectations
  • Corporate Travel confirmed a services contract with the Australian Government earlier this week
  • A closer look at why the stock finished 0.8% lower after rallying 6.5% in early trade

Expectations are arguably one of the most important drivers of a company’s share price – A stock can often rally off a downbeat announcement if it’s in-line with what the market expectations and vice versa. 

In this educational piece, I’m taking a closer look at Corporate Travel Management (ASX: CTD) and its price action on Monday, 26 June.

A Material Customer Contract

On Monday, Corporate Travel confirmed it was awarded a services contract with the ‘Whole of Australian Government’ (WOAG) for an initial four-year term plus a three-year extension option.

The contract is considered to be one of the largest travel programs in Australia and New Zealand and estimated to contribute approximately 20% of Group revenue in FY24.

The announcement was released at 1:49 pm AEST and the stock was up 6.5% to $19.25 by 2:00 pm.

But by market close, the stock finished the session down 0.8% to $17.92.

CTD 2023-06-27 13-00-41
Corporate Travel intraday chart on Monday, 26 June (Source: TradingView) 

It’s down another 1.8% in early trade on Tuesday.

So how did such a bullish announcement turn into such a volatile fade?

Morgan Stanley’s Base Case

The WOAG renewal was widely expected. In fact, anything short of a renewal would have been a disaster.

“We expect an announcement on the Whole of Australian Government (WOAG) contract by 30 June. Corporate Travel is the incumbent. We see the outcome as binary, renewal would remove uncertainty and overhang, the loss of the business would impact earnings and sentiment,” said Morgan Stanley analysts in a note on 16 June.

“Our base case is that Corporate Travel retains the contract and we assign a 70% probability to the scenario. If retention is accompanied by a guidance reiteration, we see circa 15% upside risk.”

These were the two scenarios that Morgan Stanley was envisioning:

Details of the scenario

Scenario 1 - Retain

Scenario 2 - Lose




Potential change in stock price (%)



Corresponding projected stock price



Table: Market Index | Source: Morgan Stanley

So the contract renewable was in-line with expectations but there was limited guidance besides the “contribute approximately 20% of CTM’s revenue and 30% of TTV in the ANZ region in FY24. The contract will commence 1 July 2023.”

Recapping the Price Action

So the contract renewal was in-line with expectations and the stock gaps up 6.5% as it resumes trading – The market then uses this as a liquidity event to sell.

It's worth noting that 1.46 million shares were traded on Monday versus its 20-day average of approximately 573,000 shares. 

In the lead up to Monday, Corporate Travel shares were already down for six straight sessions, down 9.8% to a near three month low.

At its current price level of around $17.70 – It’s trading closer to Morgan Stanley’s price target where the contract is not renewed. Is the stock mispriced or is there something else going on behind the scenes?

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Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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