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Facebook stock dives almost 20% on warning of slow revenue growth

28 July, 2018, 19:38 | Author: Melinda Barton
  • Facebook co-founder and chief executive Mark Zuckerberg took a major hit too. He lost $16.8 billion in extended trading

According to Business Insider, a Facebook investor has drawn up a new proposal to oust Mark Zuckerberg as chairman, 10 months before the social networking giant's next shareholder meeting.

"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 from prior quarters sequentially in both Q3 and Q4". Brian Wieser of Pivotal Research, who rates Facebook shares a Sell, said the second quarter proves that the brakes are being pumped.

The company closed at $217.50 a share on the Nasdaq on Wednesday, but that was before earnings came out. In March, the company's handling of user data in the Cambridge Analytica scandal contributed to a backlash against the size and reach of the biggest tech businesses and raised concerns that regulators may soon crack down on these firms.

Facebook shares have already been through a rollercoaster of ups and downs this year, with the biggest slump coming in April after it emerged data from tens of millions of users had been acquired by Cambridge Analytica. The stock was up more than 23 per cent for the year, before it reported earnings after Wednesday's close. Revenue increased 42 per cent to US$13.2 billion, missing the US$13.3 billion Wall Street consensus.

"Founder and CEO Mark Zuckerberg has said that he has no intention of letting Facebook become a platform known for celebrating humanity's worst impulses". But the results followed a period in which data-privacy issues came under harsh scrutiny, with Zuckerberg testifying before Congress for hours on the company's missteps. For example, Google was able to wow investors this quarter even though the recent European Union fine destroyed operating margins, dropping them from 24% to 9% for Q2 2018.

And for those hoping for a swift bounce back, the company told Wall Street the numbers won't get any better this year.

Nearly all of Facebook's revenue - $13 billion of the total $13.2 billion - came from online advertising, a sector dominated by the California social network along with Silicon Valley rival Google.

Facebook's margin fell to 44 percent in the second quarter from 47 percent a year ago as it spent heavily on security and initiatives to convince users the company was protecting their privacy. "They've invested significant dollars in building out the infrastructure, sales force and AWS partner ecosystem worldwide that I think now is starting to pay just massive dividends".

In pre-market trading on Thursday, Amazon stock had dipped 1.5 percent, Netflix 1.8 percent, and Alphabet 1 percent. The report also predicted far weaker growth in the future than had been expected.



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