Facebook Stock Plunges After Revenue Miss

Social media titan loses $130B in market cap in two hours
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Facebook stock plunged after the social media behemoth reported revenue growth below expectations, which coupled with recent scandals over mishandled user information apparently was too much for investors to bear, sending shares down more than 20% in after-hours trading.

Facebook has been battered by revelations over the past several months that it had mishandled the personal information of its users and ignored the unchecked spread of fabricated news. But investors really got antsy after Facebook chief financial officer David Wehner said the slowed sales growth would likely continue for the rest of the year.

Facebook shares, which hit a record high on Wednesday, plunged after the quarterly results were announced. At one point the stock was down 24% in after-hours trading, its biggest decline ever and shedding roughly $130 billion in market cap in just two hours. The stock was down 19% ($43.39 each) to $174.11 per share at 7:35 p.m. July 25.

Sales for the quarter were $13.23 billion, below the $13.3 billion Wall Street had anticipated and the first time the company had made such a miss since 2015.

User growth also slowed – Facebook said 2.23 billion people logged in at least once per month in the period, behind the 2.25 billion analysts expected and the slowest growth rate for the social media giant ever. Daily user growth also slowed in the period, up 11% but less than the 1.49 billion expected.

Facebook's Mark Zuckerberg

Mark Zuckerberg

It has been a rough year for the company – CEO Mark Zuckerberg was hauled in front of Congress in April after the Cambridge Analytica scandal broke, prompting calls for stiffer regulation.

In a research note, Pivotal Research Group analyst Brian Wieser said the declines weren’t a surprise.

“[T] he advertising industry – and digital advertising no less – has limits to growth, which we think is the primary factor constraining Facebook’s revenue opportunity,” Wieser said in a research note. “Deceleration such as management guided towards suggests that while the company is still growing at a fast clip, the days of 30%+ growth are numbered.” 

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