Author: Roger Aitken / Source: Forbes
Is the fizz going out of Facebook?
Well, shares in the social media giant took a hammering in after-hours trading this Wednesday following a revenues miss and an earnings call that left investors sweating. The stock plummeted 24% at one point as the company advised that revenues would continue to slow down and its costs rise.In becoming the biggest-ever one-day wipeout in U.S. stockmarket history, Facebook’s stockmarket value recovered somewhat, but still declined by 19% to around $120 billion. In so doing, the personal wealth of Mark Zuckerberg, co-founder and CEO of the social networking site, tanked by almost $16 billion over stalling growth. Some analysts described it as a “bombshell” moment and the earnings news caused immediate waves of selling on Wall Street.
While the company, headquartered at 1 Hacker Way in Menlo Park, California, witnessed zero growth in user numbers in North America, in Europe the company lost around a million users.
The loss Facebook’s stock sustained on the day was massive. It was the equivalent of seven times the market valuation of Snap (c.$17 billion), which owns Snapchat, and four times that of Twitter (c.$33 billion). Put another way it equated to the total GDP of Kuwait – some $120.3 billion in 2017 last year, which seems incredible. But the shares are still up around 350% since they floated six years ago.
“I think we were all caught off guard by the extent of the move. However, investors should really have seen something like this coming as insiders at Facebook have been selling shares heavily in recent months,” remarked Neil Wilson, Chief Market Analyst at Markets.com in London in the wake of the earnings release.
Indeed, over the last three months alone insiders – including Mark Zuckerberg – have sold off $3.8 billion worth of stock in the company.
Earnings per share (EPS) actually were a little ahead of forecast at $1.74 versus $1.72 that had been projected. And, revenues were only a tad shy at $13.23 billion compared to the $13.36 billion that had been expected. The numbers for the quarter were not all that bad, however the projected decline in revenues scared investors.
The social media behemoth revealed in its latest earnings that monthly active user numbers increased to 2.23 billion (11%) across all its platforms. This figure was less though than the consensus estimates of 2.25 billion according to Thomson Reuters polling of analysts.
Executives offered a pretty bleak picture of revenue growth in the second half and into 2019. On the call David Wehner, Facebook’s chief financial officer, said that total revenue-growth rates “will continue to decelerate in the second half of 2018, and we expect our revenue-growth rates to decline by high-single-digit percentages from prior quarters sequentially in both Q3 and Q4.” On the costs front, these will rise 50%-60% from last year.
Markets.com’s Wilson reflecting said: “Now we should always be careful about the implications of after-hours trading, but this does look different. This is not least because the volumes were…
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