Facebook is sued after stock plunge 'shocked' market

28 July, 2018, 19:48 | Author: Teresa Adams
  • Facebook shares sink 8% as Q2 revenue and user growth misses analyst estimates

Facebook's stock tanked after a disappointing second-quarter earnings report that saw the company miss revenue expectations and warn of slowing growth ahead.

The second quarter of 2018 has not been the best ever for Facebook. Facebook's results prompted selling in other Nasdaq listings, including media and advertising rivals Amazon.com Inc, Netflix Inc and Alphabet Inc. CEO Mark Zuckerberg has defended Holocaust deniers. But as I've said on past calls, we're investing so much in security that it will significantly impact our profitability.

He subsequently backtracked from this comment after it triggered widespread public outcry.

Some see the Facebook selloff as clear evidence that nothing can grow forever, especially not the world's biggest companies, especially not at the rate of nimble, promising startups.

"Earlier this week, the company was slammed by the parents of a Sandy Hook massacre victim for the hoax claims that emerged on the platform", Fox News reported. And the increased spending aims, among other things, to prevent a replay of the fake news and propaganda that Russian agents unleashed on an unguarded Facebook in an attempt to sway the 2016 presidential election.

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Facebook may be heading for its worst day on the markets in its history a day after the company revealed that user growth, amid swirling questions about how their information is used, has slowed. Although Facebook was trading a shade over $150 after the Cambridge Analytica Scandal, it now sits just over $175.

Facebook hit the headlines earlier this year when it came to light that Cambridge Analytica had used data, harvested from Facebook users, to target U.S. voters with personalised political advertising, based on psychological profiles.

Facebook's stock plunged Wednesday following the company's second-quarter earnings report.

After the General Data Protection Regulation went into effect in Europe, Facebook started asking people to check their privacy settings and make sure they wanted to share certain kinds of data. For Mark Zuckerberg, it's just about a fifth of his net worth.

For almost two years, Facebook has appeared bulletproof despite a series of scandals about the misuse of its giant social network.

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"We plan to grow and promote certain engaging experiences like Stories that now have lower levels of monetization, and we are also giving people who use our services more choices around data privacy, which may have an impact on our revenue growth", said CFO David Wehner.

The sudden drop also amounted to a test of investor faith in the class of giant, technology-focused stocks that have carried the market for much of the year. "As such, we would be aggressive buyers of the stock on weakness this morning". Facebook warned that its operating margins would fall from its current 44 percent to the "mid-30s".

Investors were also concerned by figures which showed the number of active users has also grown less quickly than expected. Facebook attributed the weaker outlook to unfavorable currency conditions, investments in new products and bolstered privacy tools that may put the brakes on breakneck revenue growth. The previous record-breaking collapse was when Intel lost $91bn on one day in 2000.

Investors began to panic after the social media company said during an earnings call Wednesday that revenue growth would continue to decelerate for the rest of the year.

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