RE: Microsoft and Meta’s Profits Are High But Stocks Are Low🤔 Make It Make Sense
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From an investor's perspective, it's not how big the profits are, it's what the company plans to do with them. It's very much a case of balance.
An investor's return is a combination of changes in share price plus dividends. If the dividends are low, they may sell shares when the price is high to get a return, which in turn will drop the price for those still holding them. If the dividends are too high, however, it could drop the share price as sensible investors wonder if they're giving too much away (particularly if owners/directors have large share holdings) and starving the company of future investment capital.
Investors will also look at what the company's business prospects for the future. Do they have lucrative projects in the pipeline ? Are there new regulations coming that might hit profits ? Increased competition on the horizon or expensive court cases ? Any of these can impact the share price.
Additionally there are broader market factors to consider. UK shares, for example, took a hit yesterday due to the budget, where the Chancellor almost doubled the tax on profits from shares.
I see your perspective as perfect, it explains a whole lot. It's virtually up to the investors. So that means the investors are actually the ones that caused this whole profit stock confusion 😳🤣