Facebook's stock dives 20% on dire predictions following second-quarter financials

27 July, 2018, 10:38 | Author: Martin Tyler
  • Facebook shares sink 8% as Q2 revenue and user growth misses analyst estimates

It was Facebook's worst trading day since going public in 2012; the collapse eclipsed Intel Corp.'s decline of US$91-billion in September, 2000, without adjusting for inflation. Then came the plunge in after-hours trading, after the company revealed it had 2.23 billion monthly users in its last quarter, up 11 per cent from last year's level, but well short of what industry analysts had been expecting. It reported revenue of $13.2 billion for the quarter, missing Wall Street estimates and rattling investors.

Facebook reported on Wednesday that growth in digital advertising sales and in the number of its users had decelerated in the second quarter.

After the General Data Protection Regulation went into effect in Europe, Facebook started asking people to check their privacy settings and make sure they wanted to share certain kinds of data. Stamos reportedly still plans to leave the company next month, following a reorganization that the New York Times said earlier this year took away 98% of the group he managed.

Facebook shares sink 8% as Q2 revenue and user growth misses analyst estimates

On Wednesday the initial fallout from Cambridge Analytica appeared in Facebook's financial results and forecast and it was a game changer.

During the call, Facebook Chief Executive Mark Zuckerberg tried to recast the disappointing earnings.

Facebook has also faced public image problems because of the way Russian Federation used the site to try to influence the 2016 USA presidential election.

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Shares in other technology companies were dragged down by the social media giant, as the technology sector fell 1.9%.

On a call after the results were issued, Zuckerberg reportedly said: "We are investing so much in security that it will have a significant impact on our profitability".

All of this was enough to spook investors in the shares on the Nasdaq when the market opened on Thursday morning. If the sell-off hits those levels in Thursday trading, it will mark one the largest collapses in value ever suffered by a US -traded company in a day.

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"It wouldn't be surprising if a couple million very irritated Brits left Facebook", says Brian Wieser, analyst with Pivotal Research.

"The company has a track record of resetting revenue growth and expense expectations only to turn around and exceed those expectations the following quarter", said Gene Munster of Loup Ventures. Like Facebook, Instagram depends on ads to generate revenue, and Stories is supposed to help sell more ads.

In contrast to Facebook, Amazon on Thursday in the U.S. reported a record profit and forecast plowing past analyst estimates.

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The site also brought in 1.47 billion global daily active users (DAUs) during its second quarter, below the 1.49 billion that analysts were projecting, according to a StreetAccount and FactSet outlook.



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