Final answer:
Changes in a company's expected future profitability can indeed shift the demand for that company's stock, which impacts the stock price. Investors and analysts consistently evaluate these expectations, which contributes to stock prices trending over time despite daily fluctuations.
Step-by-step explanation:
The question addresses how a change in a company's expected future profitability impacts the stock price. Contrary to the statement that neither the demand nor the supply will shift, the reality is that investors' expectations play a crucial role in determining the stock price. If investors anticipate that a company's future earnings will improve, then the demand for that company's stock is likely to increase, which can raise the stock price. Conversely, if the expectations are negative, the demand might decline, potentially lowering the stock price.
The stock market operates on predictions and expectations, with stock market analysts and individual investors analyzing companies continually to predict which will become more profitable. This continuous assessment contributes to the random walk nature of stock prices— they can fluctuate daily in either direction, yet they exhibit a long-term trend based on earnings expectations and other factors. Therefore, changes in profitability expectations can result in shifts in the demand for a company's stock, thus affecting its stock price.