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Home / Business / Facebook shares fall 19%, losing $ 120 billion in value after warning that revenue growth will get hit

Facebook shares fall 19%, losing $ 120 billion in value after warning that revenue growth will get hit



Facebook Inc. is apparently not bulletproof.

On Thursday, Facebook

FB, -19.36%

has lost around $ 120 billion in market capitalization after the earnings report after the close on Wednesday missed sales expectations and showed slow user growth. Weak forecasts also unsettled investors.

Should the stock fall below $ 176.46, it would mean that the stocks wiped out their gains in 2018. In the early afternoon, the Facebook stock dropped 19% to $ 176.33. At 1

2:59 Eastern Time 119.2 million shares have changed hands.

The share of the social media group lost in yesterday's session on Wednesday about one-fifth of its value. The stock fell about 7% immediately after the release of the earnings report and fell more than 20% over the course of a conference call with analysts. Almost 34 million shares changed hands in the extended session on Wednesday, well above the average volume of 17 million shares for a regular trading session last month.

Facebook stock rebounded from a decline earlier this year as a result of the Cambridge Analytica scandal, one of several controversies and warning signs that the company was able to endure with little damage to its holdings. But declining sales and user growth, followed by an executive warning that things will continue, seemed to end this run.

"The lead, it's nightmare," said GBH Insight's director of technology research Daniel Ives. "Looking at their second-half forecast in terms of user growth and cost profile, it strengthens the basic concerns about Facebook for Cambridge Analytica."




Related: Facebook pays for all its mistakes once, and it's a big bill

The company, based in Menlo Park, California, reported a net profit of $ 5.12 billion for the quarter, which was $ 1.74 per share, compared to $ 3.89 billion or $ 1.32 per share in the year earlier period. Net earnings were above analysts' average estimates of $ 1.71 per share.

However, profits were not what shook investors. Facebook had sales of $ 13.04 billion, an increase of 41.9 percent over the previous year, but that was lower than analyst estimates and past growth rates. User growth was flat in the US and Canada and lower in Europe compared to the previous quarter.

But the stock did not fall off until CFO David Wehner announced that the social media giant is expecting revenue growth

"Our overall growth rates will continue to slow in the second half of 2018, and we expect that Our revenue growth rates in both the third and fourth quarters will be in the high single-digit percentage range in Q4, "he said in the conference call. Wehner also said that Facebook continues to expect spending to rise by 50% to 60% over last year.

See also: Facebook's downbeat forecast leaves most analysts at Zuckerberg angry and still optimistic for the stock

In the past, founder and CEO Mark Zuckerberg had announced hiring 20,000 employees to ensure security on his platforms on controversies such as the use of Facebook to push fake news before the 2016 US election. The company announced that its number of employees has grown 47% to 30,275 since the same period last year, part of this over-scale spending.

"As I said in earlier calls, we are investing so much in safety that it will significantly impact our profitability," Zuckerberg said. "We're starting to see this in the quarter."

Although Ives says the quarter was anything but catastrophic – it was decent with a few rough patches – he expects investors to punish the stock in the near future.

"The neighborhood itself had geographic weaknesses and disappointed the bulls," said Ives. "There are many natural headwinds [Facebook is] as it will be a quarter that the stock is in the penalty box for a while until they can prove that the tailwind of advertising and user growth are back on track." 19659002] Facebook numbers in Europe fell largely due to the EU General Data Protection Regulation, which came into force during the quarter. Some analysts had speculated that the DSGVO could actually use giants like Facebook and Alphabet because they could implement the new requirements, unlike smaller companies, but Zuckerberg and other executives said the DSGVO was the reason for the slower number of users in Europe. Since the first quarter, it has dropped by 3 million users per day and 1 million users per month.

"We saw a decline in monthly activity in Europe, which fell by about 1 million people, and at the same time, it was heartening to see the vast majority of people affirming that we wanted to use the context, including websites who visit them to make our ads more relevant and to improve their overall product experience, "said Zuckerberg on the earnings interview with analysts.

Chief Operating Officer Sheryl Sandberg said the DSGVO did not affect the corporate structure

The only salvation for Facebook could be the continued support of advertisers. Less dependent on investors' quarterly claims, advertisers are not yet considered planned to cut their Facebook budgets.

"There's unprecedented scale, the best advertising technology in the industry," said Facebook CEO Jesse Math. "Facebook is still viable in the short term, with a focus on a long-term strategy this quarter and this year. what they do is designed to make Facebook a place that users want to be in. Any changes they make to the platform, the algorithms, the tools that advertisers use, are long term. "[19659002] When Facebook's stock plummeted Thursday, it also brought in social media rivals Twitter Inc.

TWTR, -3.60%

and Snapchat parent company Snap Inc.

SNAP, -1.53%

to the party, which sent both stocks in the low single-digit percentage range. The Facebook stock has gained 23% this year, like the S & P 500 Index

SPX, -0.30%

rose 5.5%.


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