Record-setting selloff
Stock dives 19% over fears of slow sales, user growth
Fears of slow growth set off the biggest one-day wipeout of stock value for a U.S. company.
SAN FRANCISCO – Facebook shares dove 19 percent Thursday, shedding about $100 billion in market value, for the biggest one-day wipeout of stock market value for any U.S. company.
The decline, fueled by the social network’s slowing growth, marked Facebook’s largest market drop ever, eclipsing a 12 percent drop on July 27,
2012. Another 7 percent drop on March
19, the Monday after news of the Cambridge Analytica crisis broke, caused a
$36.4 billion decline in Facebook’s market value.
Facebook’s one-day swoon surpassed Intel’s $91 billion loss in September 2000, the previous largest loss of value in one day, according to Bloomberg. The drop was based on all shares outstanding, Bloomberg said.
Other tech stocks sold off Thursday, too. Twitter was down 3 percent.
Chief Financial Officer David Wehner triggered the selloff when late Wednesday he said Facebook’s sales growth would continue to slow through the rest of the year. Shares, which had already declined 7 percent after hours, then tumbled further after the comments on a conference call with analysts.
Despite the steep drop of one of Wall Street’s leaders, its pain did not spill over to the broader U.S. stock market. The Standard & Poor’s 500 stock index, which includes Facebook and 499 other big U.S. companies, lost 0.3 percent. The Nasdaq Composite lost 1 percent.
Despite fears that the other so-called FAANG stocks – which include Facebook, Apple, Amazon, Netflix and Google parent Alphabet – would be infected by Facebook’s outlook, those fears were not realized.
The selloff points to growing concerns that Facebook will not emerge unscathed from the many controversies it
faces. The stock slide began right after Facebook reported second-quarter results after the market closed Wednesday. It was the first full financial report since Facebook became embroiled in the Cambridge Analytica scandal in March.
The problem: weaker-than-expected revenue growth, Facebook’s first such miss since 2015. It recorded sales of $13.23 billion for the three months ended in June, short of the $13.3 billion Wall Street anticipated.
Also alarming: Facebook’s growth is slowing with users in some of its most lucrative markets. Facebook reported its slowest growth rate ever, with 2.23 billion people logging in at least once a month in June, below the 2.25 billion analysts expected.
Growth in the number of users who logged in each day fell short, too, up 11 percent year over year at 1.47 billion but still less than the 1.49 billion anticipated. Daily usage was unchanged in Facebook’s biggest market, the U.S. and Canada, at 185 million daily users. Facebook saw a decline in Europe to 279 million daily users. Net income was $5.11 billion, or $1.74 a share, beating analysts’ estimate of $1.71 a share.
Facebook used to be made out of corporate Teflon. Controversies came and went but nothing stuck. And it seemed Facebook would shrug off the recent rash of scandals, too – Russian election interference, the mishandling of as many as 87 million people’s personal information by Cambridge Analytica and the unchecked spread of fabricated news. Shares hit a record high Wednesday before the results.
Even after Facebook CEO Mark Zuckerberg was hauled in front of lawmakers on both sides of the Atlantic and federal agencies began to probe Facebook, prompting calls for increased regulation, investors and advertisers were undeterred, propelling the stock to new highs.
On Wednesday, the initial fallout from Cambridge Analytica appeared in Facebook’s financial results and forecast, and it was a game-changer.
Pivotal Research Group analyst Brian Wieser, who has a sell rating on the stock, says there are limits to growth in digital advertising, even for Facebook.
“Deceleration such as management guided towards suggests that, while the company is still growing at a fast clip, the days of 30% plus growth are numbered,” Wieser wrote in a research note.
Snider reported from McLean, Virginia; Adam Shell contributed from New York