Facebook stock faces its largest one-day drop, Twitter drops too

July 27, 2018 09:52 AM

Facebook lost about $119 billion of its value on Thursday, marking the biggest one-day loss in U.S. market history. The company's shares plunged $41.24, or almost 19%, to $176.26 a day after the social media giant reported disappointing results. The slide is the largest decline in market capitalization in history, exceeding Intel's $91 billion single-day loss in September 2000, according to Bloomberg data. 

Founder and CEO Mark Zuckerberg saw his fortune drop by $15.9 billion to roughly $71 billion. It's reported that investors were spooked by Facebook's forecast showing that its number of active users is growing less quickly than expected, while the company also took a hit from Europe's new privacy laws.

Before the brutal Q2 earnings, Facebook’s share price closed today at $217.50 — a record high — but fell to around $172 after the earnings call. That’s a market cap drop of roughly $123 billion. In two hours, Facebook lost more value than most startups and even public companies are ever worth.

The report, which marked Facebook's first full quarter since the Cambridge Analytica scandal, startled investors with a bevy of red flags about setbacks to its revenue and user growth. Indeed, the drop Thursday morning was sharper than the multi-day stock slide in March following revelations of data misappropriation by Cambridge and others. 

Twitter shares opened down 14% Friday, July 27, after the company reported a decline in monthly active users and weak guidance.   The company issued weak guidance as well, with adjusted EBITDA between $215 million and $235 million. Monthly active users were 335 million --a decline from 336 million in the first quarter, San Francisco-based Twitter said Friday in a statement. Though that measure was up 2.8% from a year earlier, the company expects monthly visitors to fall again in the current period. 

Twitter revenue grew 24 percent year-over-year, with strong advertising gains. Advertising revenue was at $601 million, an increase of 23 percent year over year. The company also grew its data licensing and other revenue business, which was up 29 percent year over year.

The big story from Facebook's earnings report was the forecast that revenue will decelerate in the second half of 2018, Pivotal Research analyst Brian Wieser wrote in a research note. “[W]hile the company is still growing at a fast clip, the days of 30%+ [revenue] growth are numbered,” he wrote.

The share collapse merely returned Facebook shares to a level last seen in early May, a sign of just how bullish investor expectations had been running. At that time, the stock was still recovering from an earlier battering over a major privacy scandal. 

The past 18 months have been tough for Facebook. Ever since CEO Mark Zuckerberg said two days after the 2016 presidential election that it was “crazy” to think fake news on Facebook influenced voters, the social network has been under societal and political pressure to improve its platform. But through all the public relations crises, the company’s powerful advertising business showed few signs of slowing.

Even with the stock selloff, Facebook remains massively profitable and has a growth profile traditional media companies would kill for. Q2 revenue rose a whopping 42%, to $13.0 billion, and net income was up 31%, to $5.1 billion. Global monthly active users hit 2.23 billion as of June 30, up 11% year-over-year.

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