Facebook Crash: Stock Falls 19% On Weak Forecast And Lackluster Earnings

Facebook Crash: Stock Falls 19% On Weak Forecast And Lackluster Earnings

Facebook Crash: Stock Falls 19% On Weak Forecast And Lackluster Earnings

Facebook shares fell as much as 24 percent in after-hours trading Wednesday after sales growth didn't meet expectations - and the social media giant said it would continue to decelerate.

Facebook has recorded the biggest fall in corporate history as its value plunged by $120bn, when markets opened in NY.

Facebook's daily active users for the second quarter of 2018 were effectively flat in the USA sequentially, and even declined in Europe compared with Q1 - marking the first time the company has seen such a decline in recent quarters.

The company warned its investors that a huge financial injection would be required to buttress the business to address the controversies it's now facing, with revenue growth expected "to decline by high single-digit percentages from prior quarters".

The company also said that revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns, would not be enough to fix the damage. "It's the F in FAANG, but what's to say that, 10 years from now, Facebook isn't the next Myspace and something else has taken its place?"

Despite missing targets, it appears that scandals such as Cambridge Analytica haven't severely affected Facebook's ability to make money, nor has it caused a mass exodus-22 million extra people used the site each day compared to the previous quarter.

The earnings covered the company's first full quarter since the Cambridge Analytica privacy scandal erupted.

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The single biggest loser is Mark Zuckerberg, Facebook's founder and chief executive, who owns almost 17% of the company.

Shares tumbled in after-hours exchanges after the disappointing quarterly report brought an abrupt end to Facebook's run to record highs.

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While the company saw revenue up 42% year-over-year to $13.2 billion in its second quarter, that was short of what Wall Street expected.

Facebook has drawn investors because of its fast growth of users and profits. 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. Shares were down as much as 20 percent. "Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019".

The daily active users (DAUs) were 1.47 billion as of June 30, also an increase of 11 per cent year-over-year. They believe users have woken up to Facebook's growing list of controversies and made a decision to vote with their "Log Out" buttons.

The drop in European visitors was potentially due to the continuous revelations highlighted there about Facebook's breaches and weaknesses, and the implementation of the European Union and related entities' General Data Protection Regulation (GDPR) in late May.

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