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)
Phyllis Newhouse, the first black woman to bring a company public via SPAC on the NYSE earlier this year, has launched her second SPAC, ShoulderUp Technology Acquisition.
Phyllis is a serial entrepreneur, retired military officer, and founder of the ShoulderUp movement, which educates and encourages women around the world to reach their greatest economic, political and cultural potential. Shawn Henry is part of the ShoulderUp team, bringing his expertise on cybersecurity to the new company. Both Phyllis and Shawn joined Cheddar to discuss this new venture and how it plans to tackle the issue of cybercrime.
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Jack Constantine, chief digital officer and product inventor at Lush, joined Cheddar to talk about the cosmetic company's mass exodus from major social media platforms TikTok, Facebook, Instagram, and Snapchat, in the wake of recent reports that Instagram specifically had negative impacts on teen girls. He noted that with teenage girls being a large part of its consumer base and audience, Lush had a responsibility to market its company on outlets that prioritize mental wellbeing. "For us, we've always been a social brand, and it started to feel that social media was no longer offering what we felt we wanted to gain from it," he said. "And then obviously when you add that to the damage that it's causing, it just feels like a combination that we can't continue on with." The company also pulled out of social media platforms in 2019.
Jon Lowen, Co-Founder of Surfside, joined Wake Up With Cheddar's Baker Machado to discuss Uber's partnership with cannabis retailer Tokyo Smoke, as it's the first time a cannabis merchant has been listed on UberEats across all of its global markets.
Jack Dorsey resigned from his post as CEO of the social media company on Monday and will be replaced by chief technology officer Parag Agrawal. Mitch Rubin, portfolio manager at RiverPark Long/Short Opportunity Fund, joined Cheddar to break down the move and what it means for investors in both Twitter and Square, the payment company that Dorsey also helms. "For the long-term, I think this is very positive news for both companies," he said. Rubin also talked about growing competition in the social media space and why Twitter continues to lag behind other major players.
Jack Dorsey is officially out as Twitter's CEO. Dorsey said in a statement that the platform is ready to move away from its founders and now will be led by current CTO Parag Agrawal.
The ocean is an important topic when it comes to the climate. It plays a vital role in shaping our environment, with rising sea levels causing a 35% increase in natural disasters around the world, affecting 1.7 billion people. Dr. Sylvia Earle has been called perhaps the greatest advocate our oceans have ever had, with Time magazine dubbing her its first 'hero of the planet' and the Library of Congress naming her a living legend. She is also the founder of Mission Blue, an organization that inspires action to explore and protect the ocean. Dr. Earle joined Cheddar Climate for more on the importance of caring for the ocean and its impact on climate change.
