What you are talking about is market efficiency at work. You can't accept some things about the market and not accept others. The market can be viewed as a ma

What you are talking about is market efficiency at work. You can't accept some things about the market and not accept others. The market can be viewed as a machine that takes information and turns it into a stock price. Previous information, such as an analyst's predictions, do influence the price of a stock. If the company releases their earnings, a new piece of information, it is only natural that the price would adjust to reflect that. What many people fail to understand, is that an earnings announcement carries with it much more information than just how the recent quarter was. Now, with that said, I will say that I don't believe the markets are 100% efficient. No matter how many papers Sharpe, Fama, French, and others publish, I will never change my mind. Globally, the markets are extremely efficient, but there are local inefficiencies. Identifying and exploiting the local inefficiencies are what makes one really good at making money off of the markets.