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)
Global delivery service FedEx just received the first five of an order of 500 light commercial electric vehicles from GM's BrightDrop brand. Mitch Jackson, chief sustainability officer for FedEx, joined Cheddar to discuss the deployment of the EV600 delivery vehicles, if the new fleet will get the company to carbon neutrality by 2040, and how cost-effective they might be. "We've been working with electric vehicles for 10 years, and what we've find over that time frame is that we save over half of our operational and maintenance costs with the use of EVs over internal combustion engines, "Jackson said. "So they're economically viable."
Matt Faubion, Wealth Manager and Investment Adviser at Faubion Wealth Management, joins Cheddar to break down the pros and cons to gifting and receiving investments, like stock or cryptocurrency, as a gift this holiday season.
Trip.com is now adding Hopper's price freeze feature for its users. The feature will help travelers save money by protecting them from pricing volatility when booking their next trip. The company is the first online travel agency to partner with Hopper's B2B initiative, Hopper Cloud. Dakota Smith, chief strategy officer at Hopper, joins Cheddar News to walk us through the feature and how the company is addressing Omicorn concerns.
Ahead of the new year, award-winning journalist and TV anchor Soledad O'Brien and financial expert Jean Chatzky are teaming up to launch a brand-new podcast called "Everyday Wealth," aimed at helping listeners unlock their financial potential. O'Brien and Chatzky joined Cheddar's "Opening Bell" to discuss which topics to expect, as well as the importance of financial literacy. "I think what I'm good at is asking uncomfortable questions," said O'Brien, detailing how the podcast might stand out from others. "And sometimes when it comes to talking about money, a lot of those questions are uncomfortable."
As companies figure out how to adapt to the ever-changing COVID world, mergers and acquisitions are on the rise. A new report from PwC reveals 2021 saw the most megadeals, transactions of at least $5 billion, in the U.S. Colin Wittmer, PwC's U.S. deals leader, tells Cheddar how companies can set themselves up for deals success.
The last year saw a massive uptick in CEO turnover, with over 1,200 chief executives leaving their posts in 2021. According to a recent report from Challenger, Gray & Christmas, the main reasons cited were talent management, retention, hiring, and reimagining the workplace post-covid. Andrew Challenger, Senior Vice President, Challenger, Gray & Christmas, Inc. joined Cheddar's Opening Bell to discuss.
As supply chain issues continue to impact holiday shopping, many consumers are discovering that certain items are harder to find and are more expensive than in past years. However, secondary market platforms are one solution to that problem, offering shoppers an alternative place to find their favorite gifts. Jesse Einhorn, StockX senior economist, joined Cheddar to discuss how are platforms like StockX are a viable way for shoppers to avoid supply chain delays this holiday season.
Cockroach Labs Chief Product Officer Nate Stewart joined Wake Up With Cheddar to break down the company's Series F funding and the opportunities for growth it helps open up.
