Published: Sat, July 28, 2018
Finance | By Gustavo Carr

Facebook sees biggest fall in corporate history as shares lose $120bn

Facebook sees biggest fall in corporate history as shares lose $120bn

The market capitalization of the social-networking giant was down by as much as $148 billion before recovering a bit later in the day.

In response to what Facebook says are "specific threats" to the safety of CEO Mark Zuckerberg and his family, the company says it's spending another $10 million on top of what's already a record personal security budget for its chief executive and founder.

Some analysts however said it was too soon to write off Facebook or its growth prospects, and that the company may have simply been warning of the worst-case scenario.

The news sent Facebook's stock free-falling almost 25 percent in after-hours trading.

Windsor added that Facebook is forced to hire more people to handle tasks such as filtering inappropriate content after discovering the limits of artificial intelligence. Investors could be waiting to see if the stock has bottomed or if more bombshells, such as the proposal to remove Zuckerberg as chairman, are still unexploded.

At least 16 brokerages cut their price targets on Facebook after Chief Financial Officer David Wehner startled an otherwise routine call with analysts by saying the company faced a multi-year squeeze on its business margins.

"Facebook generated $13.23 billion in second-quarter revenue - up 42 percent year-over-year - though it missed analysts' estimates at $13.36 billion", Ciaccia noted.

More news: Emery comments on Arsenal contract offer to midfielder

'Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis, ' Wehner said in a conference call.

On Wednesday the initial fallout from Cambridge Analytica appeared in Facebook's financial results and forecast and it was a game changer. Within minutes it was down 15%, then 18%, then 24%.

Facebook reported US$5.1 billion in profit, or US$1.74 per share, compared with the average estimates of US$5.1 billion and US$1.72 per share among research gathered by Thomson Reuters.

In a sign of just how bullish investor expectations were, though, the collapse merely returned Facebook shares to a level last seen in early May. The company's user base flatlined in its biggest market, the USA and Canada, at 185 million daily users, while declining 1% in Europe to 279 million daily users.

First, Facebook is battling currency headwinds. In other words, there is practically nobody left to get on the platform. But the dollar's decline this year will reduce the dollar value of Facebook's foreign revenue. That will put a drag on sales because Facebook makes more money on its core News Feed than its other products.

At the same time, the company also reported that growth was flat in North America. But the ongoing scandals have caused many people to take another look, he said.

Like this: