Home > Venture Capital / Private Equity > Revenue and earnings forecasts; active vs. passive investing

Revenue and earnings forecasts; active vs. passive investing

When companies like Intel are hesitating to forecast revenue numbers because of the current economic environment, do startups need to come up with one for their investors?  The answer is yes, but we may need to give them a little more wiggle room than usual.  The difference lies in the divergence between internal budgeting and external investor communications — as active investors and board members, we have a budget-view of forecast sales.

This however points to one of the differences between active and passive investing: we can manage our own expectations as the fiscal year drags on and actuals roll in. Further we actually assist the company as it grows to meet its forecasts.  On the other hand,  retail (passive) investors in Intel, Manpower, etc., will (in the near term) not have the luxury of expectation and the gains/losses that are bred by beating/missing forecasts.

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