Facebook Heading for Its Worst Trading Day Ever

28 July, 2018, 10:11 | Author: Kevin Carter
  • Zuckerberg loses more than $15 billion in record Facebook fall

Despite facing a slew of controversies this year - from the Cambridge Analytica scandal, accusations of spreading violence in some countries, and spreading fake news - Facebook seemed to be on track with sales projections and profit estimates.

But the Silicon Valley company's streak ended Wednesday when it said that the accumulation of issues was starting to hurt its multibillion-dollar business and that the costs are set to continue playing out for months.

Strong ad sales from Google, which is Facebook's main competitor for online advertising, had sent expectations for the social network's earnings up, along with its stock price. While the company reported a growth in all markets, its overall revenues missed analyst estimates.

Well even with all of its control, power, and data it has on everyone the social networking giant saw its shares dip 19% in a single day which saw $120 billion eradicated from its market value, with Facebook now holding the record for the largest one-day drop in the history of the U.S. stock market. Make no doubt, a 42 percent growth figure is still extremely robust, and that is coupled with an 11 percent year-over-year growth in monthly and daily active users.

Chris Beauchamp, chief market analyst at IG Group said: "Perhaps the data scandal is at last beginning to bite in Facebook's earnings". The company's shares also took a sharp hit in the days following the revelation that Cambridge Analytica had illegitimately gained access to the personal data of tens of millions of the company's users.

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Some analysts, however, believe it's more than that.

Facebook lost about $130 billion in market value in just two hours, its steepest stock decline ever, and the personal wealth of Facebook co-founder and chief executive Mark Zuckerberg also took a major hit, Mark Zuckerberg lost almost $17 billion in just two hours on Wednesday.

"This is a privacy wake-up call that the markets are delivering to Mark Zuckerberg", said Jeffrey Chester of the Center for Digital Democracy, a privacy advocate, according to The Washington Post. "Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis", Wehner said. Facebook's share price dropped by 7% after the earnings release and then proceeded to deep-dive during and after its earnings call. Some reasons included Facebook investing in Stories, which has lower levels of monetization, as well as improving privacy features as a result of GDPR and other user demands.

Before the results were announced, Facebook's shares had closed in NY at $217.50, a record high, and had gained 23% this year. And he reiterated a point made during earlier calls: that Facebook's profitability will suffer because of its heavy investments in security.

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