The way stock prices work is that the price of a company's stock (or more relevantly, the price*num_shares) incorporates their current earnings as well as their potential future profits (which is driven by the company's forecasted growth). Updates on how the company is actually performing (e.g. earnings releases) are a chance to get concrete information that allows everyone to update their expectations of future growth. If the market at large was expected some number $N, and the actual released figure less than $N, then self-evidently the expected growth would be adjusted down.
If I expect that I'll have 50,000 dollars in the bank a year from now (starting from 0), and 6 months in I only have 15,000 dollars, then naturally I would adjust my expectations downwards.
Ok but from my understanding - you get to buy and sell stocks. So when twitter says that instead of earning say 300 million, they a bit less like 280, why is this a big problem?
Did they expect the stock to be valued higher and because it has not lived up to that, they're selling it and buying a different stock that will do that?
It's both what they just did and what they are trending towards in the future.
twitter is currently valued at say $35 billion then long term to justify that valuation per what the stock market demands long term they need to consistently generate around 2 billion a year in profit. If they do really well and have say a 25% margin they'd need $8 billion a year in revenue to operate at that level. Current revenue projections are closer to 2 billion and are being scaled back by executives and they're not consistently profitable at all.
There's a big gap between where they need to be to support the current stock price and where they are (and seem to be heading in the near and mid term). That's why the stock is under a lot of negative pressure.
> who sets these expectation numbers, how do they get it and why can't normal investors arrive at the same numbers?
I'm not quite sure what you're asking here: "Normal" investors can and do set these numbers. Every time you buy or sell a share of stock at a given price, you're adding your (tiny) signal of what you think the price should be (and nudging it a little in that direction as well). The price of the stock reflects the aggregate of the millions of these little guesses.
If I expect that I'll have 50,000 dollars in the bank a year from now (starting from 0), and 6 months in I only have 15,000 dollars, then naturally I would adjust my expectations downwards.