Facebook (FB) Stock Sinks as Revenue Misses Expectations

28 July, 2018, 19:45 | Author: Salvatore Jensen
  • Facebook shares sink 8% as Q2 revenue and user growth misses analyst estimates

The social media company's financial results, released late Wednesday, fell short of Wall Street expectations as the company continues to grapple with privacy issues. If that holds through Thursday's close, he will slide to sixth place from third on the Bloomberg Billionaires Index.

The fallout comes after the company's announcement that growth might slow after "an avalanche of scandals involving misinformation and data misuse". Those problems hadn't mattered to the success of the business - until now.

As for Facebook, it actually made money in the quarter, just not enough to appease Wall Street.

"We plan to grow and promote certain engaging experiences like Stories that now have lower levels of monetization, and we are also giving people who use our services more choices around data privacy, which may have an impact on our revenue growth", said CFO David Wehner.

Facebook's value recently tumbled more than $100bn. BMO Capital raised its expectation to $2,250 per share from $2,000. We're starting to see that this quarter.

RBC Capital Markets analyst Mark Mahaney said the drop creates a rare buying opportunity for Facebook shares. In March, the company's handling of user data in the Cambridge Analytica scandal contributed to a backlash against the size and reach of the biggest tech businesses and raised concerns that regulators may soon crack down on these firms.

On July 24, 2018, according to the filing, a Facebook board committee "approved an annual pre-tax allowance of $10 million to Mr. Zuckerberg to cover additional costs related to his and his family's personal security". And the increased spending aims, among other things, to prevent a replay of the fake news and propaganda that Russian agents unleashed on an unguarded Facebook in an attempt to sway the 2016 presidential election.




The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Zuckerberg and Chief Financial Officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users. Q2 revenue rose a whopping 42%, to $13.0 billion, and net income was up 31%, to $5.1 billion. Analysts projected $13.3 billion. The set of regulations gives users more control over their online data.

Pivotal Research Group analyst Brian Wieser, who has a sell rating on the stock, says there are limits to growth in digital advertising, even for Facebook.

"T$3 he number of daily active users on the platform - an important metric for judging the success of a website or app - only grew by 22 million - the lowest growth figure since 2011", Breitbart News divulged.

Before the earnings report, the bank had forecast Facebook shares would soon be worth $228 each.

Facebook has been playing favorites with certain users and companies who lean left politically, silencing pro-Trump people and companies including the influential Diamond and Silk. The company may have halted more ad purchases than expected as it applied a broad definition of what's considered "political". Facebook's results prompted selling in other Nasdaq listings, including media and advertising rivals Amazon.com Inc, Netflix Inc and Alphabet Inc. It reached $25.91 per user, up from $23.59 during the first quarter. All told, the US$119 billion of its value that was wiped out is worth almost as much as McDonald's.

Zuckerberg's critics believe appointing an independent chairman would lead to better management, while Facebook argues this would create "uncertainty, confusion, and inefficiency". The company doesn't break out Instagram's revenue. That surprised investors because of the belief that the new laws wouldn't hurt revenue. The company also reported a second-quarter profit of $2.5 billion (roughly Rs. 17,100 crores), its largest ever.

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