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NEW YORK (CBSNews / AP) – Facebook lost Thursday about $ 119 billion worth of its worth, marking the biggest single-day loss in the history of the US market.
The company's stock plunged $ 41.24, to $ 176.26 a day after the social media giant reported disappointing results. According to Bloomberg data, the largest decline in market capitalization in history exceeds $ 91 billion in September 2000.
Founder and CEO Mark Zuckerberg sees his fortune drop by $ 15.9 billion at about $ 71 billion. His personal loss, if only on paper, exceeds the value of companies like Molson Coors and Macy's, whose market value is $ 14 billion and $ 12 billion, respectively.
Investors were frightened by Facebook's forecasts. users are progressing slower than expected, while the company has also been affected by new EU privacy laws.
The report, which marks the first full quarter of Facebook since the Cambridge Analytica scandal, alarmed investors. his business figure and the growth of the user. Indeed, Thursday morning's decline was more marked than the drop in several-day stocks in March following revelations of data misappropriation by Cambridge and others. "The perceived narrative around Facebook has changed after the announcement of yesterday's results," said Jeff Henriksen, managing partner of Thorpe Abbotts Capital. "The market seems to call into question the quality of growth observed in the past."
The collapse of the stock has only brought Facebook's shares back to a level reached in early May, a sign of investors' bullish expectations. At that time, the stock was still recovering from a major scandal over the protection of privacy.
Facebook is no stranger to a volatile stock price and rebounded after incidents, including Cambridge Analytica. While several analysts belittle the title, others say that they still believe in the growth of the company in the long run.
"Even the best hitters sometimes hit," writes Wedbush analyst Michael Pachter, who lowered his price to 12 months. $ 250 target of $ 275, in a research report. "In our opinion, the sale is exaggerated and largely unjustified."
Still, investors were not ready for most of the bombs dropped by Facebook's chief financial officer, David Wehner.
A shot of Europe
The growth of European advertising revenues in Europe "has slowed more rapidly than other regions", partly because of the new European privacy laws, has said Mr. Wehner. This surprised investors because they believed the new laws would not hurt revenues.
The new laws were in effect only for one month of the quarter, which means that the company could have more impact during the quarter. The new regulation also affects the growth of users in the region due to the impact of the requirement for consumers to join Facebook and link their accounts to third-party websites, said M Pachter
. Facebook users control their privacy, and it should be obvious to investors (and to us) that user control would result in a slightly lower commitment, "he noted, referring to EU rules on privacy protection. data. In the long run, GDPR could end up favoring Facebook and other large companies that have the resources to adapt to new requirements. They could also disadvantage lesser-known small businesses that do not have the resources to comply and that could face heavy fines if they do not.
Instagram worthy?
Some investors were also dismayed by Facebook's revelation about Instagram Stories, which allow users to post videos or photos that disappear after a day. Like Facebook, Instagram depends on ads to generate revenue, and Stories is supposed to help sell more ads.
But Wehner said the product had "lower monetization levels," adding that the company planned to invest in service growth. "It's going to have a negative impact on revenue growth," he said.
Profitability Problems
Facebook has attracted investors because of the rapid growth of its users and profits. Yet both categories face headwinds. In the case of the latter, Wehner noted that "total growth in spending will exceed revenue growth in 2019," lowering operating margins.
Investors are closely monitoring operating margins because they are an important indicator of profitability. The lower the operating margin, the less profitable the company is. Facebook warned that its operating margins would fall from its current 44% to the mid-30s.
User growth was "dull," noted Pachter.
Is it time to defuse Facebook? Some analysts argue that his long-term prospects are favorable, Mark Mahaney of RBC Capital Markets, writing that the liquidation could represent "one of the best points of entry that can be obtained on FB, "according to Bloomberg
. According to Facebook, Facebook's investment is becoming a profitable investment for Facebook
. "Facebook is actively choosing to make less money by privatizing short-term monetization to boost commitment to even higher levels of time and attention from their $ 2.5 billion. Monthly users, "he writes." Former media executives … should not rejoice – they should be scared, very scared. "
(© 2018 CBS Interactive Inc. All Rights Reserved – The Associated Press contributed to this report.)
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