Question

Pfizer Corporation announced a new capital investment program., and its stock price increased. Western Digital Corporation (a disk-drive maker) announced a new capital investment program, and its stock price decreased. How do you explain these opposing responses? what should a company that is considering a new capital investment conclude from this evidence?

Answer 1

The same news can be discounted from a different perspective for different companies in the market and the stock market are always trying to be futuristic to determine the effect of the news into the price of the company, so they will be trying to to ascertain the futuristic impact of undertaking the project from both company's perspective, and will be trying to discount the profit and loss into the prices of the company as soon as possible hence it can be said that the same news cannot be discounted similarly for a different company in the stock market and it will be discounted differently for different companies in the stock market.

If the company is making profits and it is undertaking a new the program then will be likely to capitalize upon the program but when the company is making adequate losses, and it does not have adequate profits to cover its cost, and it is undertaking new project by doing capital expenditure, then it will be likely to make a loss, and hence these losses and profits will be undertaken by market participants, and they will discount it into the stock price respectively.