Facebook Loses a Quarter of Its Value After Dismal Earnings
Shares of Facebook continued to plunge Thursday, wiping more than $100 billion from its market cap in just hours after the company's CFO forecast a significant drop in revenue growth and margins in the coming quarters.
"Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019," said Chief Financial Officer David Wehner on a conference call Wednesday. "Over the next several years, we would anticipate that our operating margins will trend towards the mid-thirties on a percentage basis."
Wehner's comments on the conference call came after Facebook said revenues grew less than expected in the second quarter, and its user count missed estimates. The statements accelerated losses in the stock, which was down as much as 24 percent after hours.
"\[We see\] substantial legal and regulatory issues, and really structural changes in the business model, that we're going to see evolve over the next couple quarters at the least," said CFRA analyst Scott Kessler.
In the first earnings report to cover a full quarter since the Cambridge Analytica scandal broke, the social media network said monthly active users grew 11 percent from a year ago to about 2.23 billion people, though analysts were looking for 2.25 billion. Users in the U.S. remained at 241 million, the same level as at the end of March, while users in Europe fell for the first time.
"I think we've hit a point with Facebook where user growth is just going to slow down," said Jason Moser, analyst at Motley Fool, in an interview to Cheddar.
Revenues came in at about $13.2 billion for the quarter, also short of estimates.
The company has been plagued by criticism over how it handles user data for months, and CEO Mark Zuckerberg has not only issued several rare public apologies but even testified before Congress on the issue.
Facebook was also hit with calls to better police the content on its platform, most recently after the company refused to take down a post from right-wing conspiracy theorist Alex Jones, threatening Special Counsel Robert Mueller.
Ad sales rose 42 percent during the quarter but were outpaced by a 50 percent increase in costs, driven by added efforts to address those issues.
Facebook's stock drop, the biggest on a percent basis ever for the company, erased all the gains it had made since its last earnings report three months ago. The loss in market value was bigger than the entire market cap of IBM, McDonald's, and Nike.
The results put pressure on the entire tech landscape, with shares of Amazon, Twitter, Snap, and Google parent Alphabet all falling in sympathy.
Quick facts from Facebook's Q2 earnings report:
* Earnings per share: $1.74 vs. $1.72 estimate
* Revenues: $13.23 vs. $13.36 billion estimate
* Monthly active users: 2.23 billion vs. 2.25 billion estimate
* Daily active users: 1.47 billion vs. 1.49 billion estimate
* Monthly active users in Europe fell for the first time
* Mobile ad revenue accounted for 91 percent of all ad revenue
* Ad revenue grew by 42 percent, but costs grew by 50 percent
For full interview, [click here](https://cheddar.com/videos/facebook-earnings-drop-as-much-as-10-after-slight-revenue-miss)
Verizon and AT&T have agreed to delay the launch of their 5G networks for two weeks following pressure from the Federal Aviation Administration, airline companies and even Transportation Secretary Pete Buttigieg. The aviation industry is concerned the 5G rollout could bring technical challenges or safety concerns on top of the current disruptions they're already dealing with from COVID and severe weather. Hugh Odom, founder and president of Vertical Consultants and former AT&T attorney, discusses how the Biden administration was able to come to this agreement with the wireless carriers.
Angelo Zino, Senior Industry Analyst & Vice President at CFRA Research, breaks down the tech giants' valuation milestone and discusses the areas of Apple's business that could see further growth.
General Motors rolled out the newest addition to its EV fleet with the all-electric Silverado pickup truck. Deborah Wahl, chief marketing officer at GM, joined Cheddar to talk about the latest EV offering and how it matches up to its past gas-powered versions. She said she expects demand to soar after the "first-level truck" sold out in just 12 minutes and talked about steps GM plans to take to regain its title as top U.S. auto seller after being dethroned by Toyota in 2021 with emphasis on the EV market. "I think this is an exciting new inflection point for the market overall, for [an] idea of an all-electric future, and certainly shows that we're extremely committed to the idea of everybody in an electric vehicle," said Wahl.
With the annual CES convention underway amid COVID, HP unveiled rolled out a number of new products virtually this year, including new gaming PCs and 4K display monitors. But as industries look toward a greener future, HP is working with the climate crisis in mind. James McCall, chief sustainability officer at HP, joined Cheddar's Kristen Scholer to discuss the company's climate goals, which includes reducing its carbon footprint to net-zero by 2040. He admitted that reaching the ambitious goal will be difficult because much of the company's emissions totals come from third parties. "A large part of our footprint is outside of HP's direct control. A lot of it comes either from our incoming supply chain, the materials, our manufacturing process, or about 30 to 40 percent of it comes from our consumer-use base," McCall told Cheddar.
Martin Fischer, president of technology supplier for cars and commercial vehicles ZF North America, joined Cheddar to discuss the company's solutions for next-generation mobility in autonomous vehicles and its plans to usher in the next phase of electric vehicles. He also talked about the rising demand for self-driving technology on a global scale. "Whereas we are really active also there for passenger cars and commercial vehicles, what we showcase at CES now virtually is our autonomous shuttles," he said. "So, what that means is we bring these vehicles to busy city centers and can take traffic levels down."
Steve Patton, EY Americas Mobility Sector Leader, joins Cheddar News to discuss what can be done to speed up the adoption of EVs, and how infrastructure can be scaled up to support this transition.
Pfizer and BioNTech are working to develop an mRNA-based shingles vaccine following the success of the COVID-19 shot. This latest collaboration will mark the third time the pharmaceutical companies have worked together on a vaccine.
