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

Roman Schwartz
July 28, 2018

When Facebook warned of slower growth it tipped the balance, sending the stock tumbling.

Well even with all of its control, power, and data it has on everyone the social networking giant saw its shares dip 19% in a single day which saw $120 billion eradicated from its market value, with Facebook now holding the record for the largest one-day drop in the history of the United States stock market. "We are committed to investing to keep people safe and secure, and to keep building meaningful new ways to help people connect", chief executive Mark Zuckerberg said.

His fortune tumbled by US$16.8 billion in late trading Wednesday, as shares of the social media giant slid 20 per cent at 5:37 p.m.in NY on disappointing results. A $16 billion drop took his fortune down to $70 billion, making him the sixth richest person in the world, having previously been in third place. Mobile now makes up 91% of the company's advertising revenue. Although revenue had increased by approximately 42 percent, the number still fell short of analyst projections. European DAUs were down from 282 million last quarter, potentially related to the effect of the enactment of the General Data Protection Regulation (GDPR) in the European Union. On Thursday, shares opened down 18 percent, wiping more than $100 billion off of its market value.

Before today's massive loss, Facebook's largest single-day drop came in July 2012 when it shed 11 percent.

In pre-market trading on Thursday, Amazon stock had dipped 1.5 percent, Netflix 1.8 percent, and Alphabet 1 percent.

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And for those hoping for a swift bounce back, the company told Wall Street the numbers won't get any better this year. But it stayed relatively steady after that, at least until the call started and David Wehner, Facebook's chief financial officer, began discussing the company's financial outlook. A figure that itself was up from $4.9 million in 2016.

"The bundling of consent for Facebook to use consumer data with access to the platform appears to be an aggressive interpretation of GDPR, and one that might be more subject to eventual regulatory action", Wieser said. We're starting to see that this quarter.

For Facebook, financial stumbles are rare.

The problem: weaker-than-expected revenue growth, Facebook's first such miss since 2015. Late past year the company already issued a warning about profitability, and in April Zuckerberg admitted to Congress that the company had reacted slowly.

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