Facebook shares fall 19%, losing $ 120 billion in value after warning that revenue growth will take a hit

Facebook Inc. is obviously not bullet-proof.

Thursday, Facebook

FB, -19.36%

lost about $ 120 billion in market capitalization, after his earnings report after market close missed expectations on earnings and showed a slowdown of user growth. A weak orientation also shook the investors

If the action closed under the bar of 176.46 $, it would mean that the shares canceled their gains of 2018. In the early afternoon, the Facebook shares were down 19% to $ 176.33. At 12:59 pm, Eastern Time, 119.2 million shares changed hands

The stock of social media behemoths lost about one-fifth of its value in the extended session on Wednesday. The stock plummeted about 7% immediately following the release of the earnings report, before dropping to more than 20% following a conference call with analysts. Nearly 34 million shares changed hands during Wednesday 's extended session, well above the average volume of 17 million shares for a regular trading session over the last month.

Facebook's stock had recovered from a decline earlier this year in the wake of the Cambridge Analytica scandal, one of several controversies and warning signs that the company had managed to withstand with little damage to its stock. But the decline in revenue and user growth, topped by a warning from the leaders, seemed to end this race.

"Orientation, that's the nightmare," said Daniel Ives, head of technology research. "If you look at their forecasts for the second half of the year in terms of user growth, and the spending profile, it brings together fundamental concerns on Facebook after Cambridge Analytica."

Related: Facebook pays for all its mistakes at The company based in Menlo Park, Calif., Reported a net profit of $ 5.12 billion for the quarter, or $ 1.74 per share, against 3.89 billion dollars or $ 1.32 a share a year ago. period. The net result was above analysts' average estimates of $ 1.71 per share.

However, profits are not what has rocked investors. Facebook recorded sales of $ 13.04 billion, an increase of 41.9% over the previous year, but lower than analysts' estimates and earlier growth rates. The number of users stagnated in the United States and Canada and decreased in Europe compared to the previous quarter.

But the title did not take off until Chief Financial Officer David Wehner did not reveal that the social media giant was expecting revenue growth.

"Our total revenue growth rates will continue to slow in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages in previous quarters, both in the third quarter and in the second quarter of the year. Q3, "he said in the conference call. Wehner also said that Facebook is still expecting spending to increase by 50% to 60% over last year.

See also: The prediction of Facebook leaves most analysts angry at Zuckerberg and still optimistic about the title

In the past, founder and CEO Mark Zuckerberg said the company was planning to start a business. hiring 20,000 people to manage security on its platforms. to controversies such as the use of Facebook to push false news ahead of the 2016 US elections. The company revealed that its head count has increased by 47% to 30,275 since the time of the year previous, a portion of these disproportionate expenses.

"As I have said in past appeals, we are investing so much in safety that it will have a significant impact on our profitability," said Zuckerberg. "We are starting to see this quarter."

Although Ives says that the quarter was far from disastrous – it was decent with some basics – it is expected that investors will continue to punish the stock in the short term.

"The neighborhood itself had weak geographical points and disappointed the bulls," Ives said. "There are a lot of natural headwinds [Facebook is] as it's going to be a quarter that will put the stock in the penalty box for a while until they can prove that the backing winds up and User growth is back on track. 19659002] Facebook's numbers in Europe have declined largely due to the general data protection regulations of the European Union, which came into effect during the quarter. Some analysts had speculated that GDPR could actually benefit from giants like Facebook and Alphabet because they would be able to implement the new requirements unlike small businesses, but Zuckerberg and other executives said that GDPR was the reason for the slowdown of European users. It has fallen by 3 million daily users and 1 million monthly users since the first quarter.

"We saw a drop in monthly activities in Europe, as a result of about 1 million people, and at the same time, it was encouraging to see the vast majority of people claiming that although we wanted to use the background, Zuckerberg said on the earnings call with analysts.

chief operating Sheryl Sandberg said on the call that the GDPR has not affected the company from the websites that they visit, to make our ads more relevant and improve their overall experience. "top line.

The unique grace for Facebook could be the continued support of less prone to quarterly investor demands, advertisers are not yet seen as planning to cut Facebook budgets.

"There is still an unprecedented scale, the best advertising technology in the industry. ie, "said Jesse Math, head of Facebook. "In the short term, Facebook is still viable.Really this quarter and this year, it is focused on a long-term strategy, all they do is focus on making Facebook a place where users want to be. changes to the platform, algorithms and tools used by advertisers are long-term. "