Microsoft and Meta’s Profits Are High But Stocks Are Low🤔 Make It Make Sense
Who else will be confused about the situation I'm about to tell you. Two giant companies Microsoft and Meta (formerly known as Facebook) have come out to say that they've made huge profits this year but the strange thing is that while the profits are higher, their stock prices dropped.
I know there are smart people in the community so you can explain better to me how this is possible 😂
I got surprised when I heard and I'm still doing the math. These are big, successful companies we’re talking about here, the kind of company you would expect Wall Street to be talking about all the time because of the the amount of market shares just these two have.
I have done a bit of thinking and if your stocks will go down it's probably because your investors have reduced. I guess the investors wanted more than what these companies are doing right now.
I believe the main concern of the investors is probably the fact that neither company is building data centers fast enough to keep up with demand, especially with everyone’s attention on AI these days.
The investors are more focused on Microsoft’s Azure cloud business. Even though it’s growing as a business, it still didn’t meet the expectations of some analysts.
Although Meta has plans of spending big money on their AI projects, the investors have become impatient because they don't know how long they can keep spending on the company without immediate returns for themselves.
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Awesome job @theringmaster 😅👍
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 😳🤣