Monday, 20 August, 2018

Facebook stock falls 24 percent on forecast for slowing growth, rising expenses

GettyFacebook CEO Mark Zuckerberg may not like what he reads GettyFacebook CEO Mark Zuckerberg may not like what he reads
Scott Davis | 26 July, 2018, 13:23

Zuckerberg in January said he was going to adjust the news feed to make sure people spend more time on Facebook with meaningful content from their friends and family members - a move the company has said would decrease user engagement with the site.

As Facebook stock plunged over 20% in after-hours trading Wednesday following a disappointing earnings report, CEO Zuckerberg lost $17.6 billion in net worth. If that loss holds through Thursday's close, he will slip to sixth place from third in the Bloomberg Billionaires Index. Fourteen analysts surveyed by Zacks Investment Research expected $13.4 billion. Analysts projected US$13.3 billion. The period was also marked by Europe's implementation of strict new data laws, which Facebook said led to fewer daily visitors in that region.

But the shedding is still notable because Facebook, until now, has only ever experienced growth in users quarter-to-quarter.

In response, Facebook's stock tumbled more than 23 percent in after-hours trading, erasing more than $120 billion in market value in less than two hours. This week, Colin Stretch, who led Facebook's investigation into Russian election interference and who testified before Congress last year on Facebook's behalf, said he would leave the company by the end of the year. Facebook's results prompted selling in other Nasdaq listings, including media and advertising rivals Amazon.com Inc, Netflix Inc and Alphabet Inc.

Facebook suffered a blow in China on Wednesday when regulators there withdrew their approval of a company innovation hub to support local startups, the New York Times reported on Wednesday, citing a person familiar with the matter.




The revenue shortfall reflects warnings from Chief Executive Mark Zuckerberg that Facebook's bottom line could be affected by costly measures it is taking to improve safety and security for its 2.23 billion monthly active users. In terms of revenue, the tech giant earned $13.23 billion but missed Thomson Reuters' estimates of $13.36 billion.

Worldwide daily user growth for Facebook's namesake service slid for its sixth straight quarter, bringing it to almost 1.5 billion users in the second quarter. In Europe, Facebook had to respond to new privacy rules.

Facebook's revenue grew at its slowest pace in nearly three years. It owns three other properties with more than 1 billion users: WhatsApp, Messenger and Instagram.

About 2.5 billion people use at least one of the company's apps each month, founder Zuckerberg said. The company said headcount was 30,275 as of June 30 - an increase of 47 percent year over year.

GBH analyst Daniel Ives wrote, "While the knee jerk reaction will be negative on these mixed results especially given the meteoric rise in shares from the March lows, we ultimately believe the advertising revenues and underlying MAU/DAU metrics were "good enough" and show the worries of a massive fundamental and user deterioration at Facebook post Cambridge was more bark than bite at this point".

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