Historic plunge by Facebook —$119B
Tech giant’s revenue, growth slowdown, leading to largest 1-day loss on Wall Street ever
The glory days for Facebook came crashing down Thursday as the social media giant lost about $119 billion of its value, the largest oneday drop in value for a company in Wall Street history.
Stock prices fell almost 19 percent, and by the time the day was done, Facebook had become the only U. S. company ever to lose more than $100 billion in market value in just one day, according to Fact Set data. The drastic fall came after Facebook disclosed Wednesday that investments in new services and initiatives — including some to beef up security and privacy in the wake of recent controversy — have weighed on the company’s revenue prospects, while user growth has slowed as the company deals with the Cambridge Analytica scandal fallout.
Facebook shares finished the day at $176.26, leaving some on Wall Street wondering if the social media giant’s best days may now be behind it. With the losses, Facebook’s market capitalization stood at just over $510 billion after finishing Wednesday with a valuation of about $630 billion.
No other company had tumbled this far, this fast. Intel held the previous record when it lost $90.74 billion on Sept. 22, 2000, during the dot- com bust, according to CNBC. Among other notable Bay Area companies, Apple lost $59.6 billion in 2013.
Dan Ives, chief strategy officer and head of technology research at GBH Insights, said Facebook is at a critical juncture for keeping its investors on board and remaining relevant in the social-networking industry.
“For now, Facebook stock is in the penalty box,” Ives said. “This is a fork-in-theroad situation for Facebook to drive back content, engagement and get the company onto its next phase of growth or face much more challenges ahead.”
Revenue outlook was among the issues that turned Facebook investors against the company.
Chief Financial Officer David Wehner said in a conference call Wednesday that the company’s revenue would be impacted by “a combination of factors,” such as emphasizing new products, including Stories, a feature that lets people post short collections of photos and videos that disappear after 24 hours.
“That’s going to have a negative impact on revenue growth,” said Wehner, who declined to give an exact sales forecast.
Facebook also attributed international factors for affecting its results, chief among them the effects of foreign- currency exchange rates and the recently implemented General Data Protection Regulation standards, put in place by the European-Union to give individuals more privacy and control of their personal data online.
“Unfortunately for Facebook and its investors, none of these issues will be remedied imminently,” said Piper Jaffray analyst Michael Olson, in a research note. “The key question that requires an answer, therefore, is to what degree are these sustained headwinds now baked into Facebook’s shares.”
Wehner, CEO Mark Zuckerberg — who lost more than $15 billion in the value of his stock in Thursday’s rout — and Chief Operating Officer Sheryl Sandberg avoided mentioning the Cambridge Analytica scandal, in which the British company obtained millions of Facebook users’ data to use for political purposes. But Wehner acknowledged that Facebook’s revenue outlook has suffered from the perception that Facebook has played fast and loose with its users’ personal information.
“We are also giving people who use our services more choices around data privacy, which may have an impact on our revenue growth,” Wehner said.
Facebook’s user-growth rates added to investors’ concerns about the company. Facebook said the second quarter ended with 2.23 billion monthly active users, an 11 percent increase from a year ago, but that figure was up just 1.54 percent from the first quarter of the year, indicating Facebook has had a difficult time in recent months getting new consumers to use its social-media platform.
“( Facebook’s) outlook suggests a growth ‘ wall’ is in sight,” said Pivotal Research analyst Brian Wieser, in a research note Thursday morning. “The big story for the market was the commentary around (revenue) decelera- tion at high single-digit levels during each of the next two quarters.”
For its second quarter, Facebook reported earnings of $1.74 a share, on revenue of $13.23 billion. Those results were mixed, as Wall Street analysts had forecast Facebook to earn $1.72 a share, but on revenue of $13.33 billion.
Wehner said that for the rest of the year, “Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single- digit percentages” on a sequential basis in the third and fourth quarters of this year.