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Market prices are forward-looking. Analysts use all of the information available to decide what the value of a stock should be. In earnings season, new information becomes available, and analysts have to re-evaluate their models based on these new facts and insights. That's why we see stock prices make large and rapid moves in earnings season.
But occasionally, Mr. Market's emotions push prices too far as traders overreact to news. In these cases, Mr. Market is actually giving us an opportunity.
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