Facebook shares plunge 8.6 percent after missing estimates on monthly active users

Sean Reid
July 26, 2018

Growth in new users slowed with Facebook adding 11 percent more daily and monthly active users on the main Facebook app in the second quarter, compared with 13 percent in the first quarter.

For numerous world's richest people, losing $16.8 billion in a day would be a wipeout.

Facebook CEO Mark Zuckerberg could slide to sixth place from third on the Bloomberg Billionaires Index if the downward trend following late trading on Wednesday in the U.S. continues through Thursday.

Facebook shares fall as user growth slows

The results, announced after markets closed, sent Facebook's shares plunging 24% in extended trading. If that loss holds through Thursday's close, he will slip to sixth place from third in the Bloomberg Billionaires Index. Fourteen analysts surveyed by Zacks expected $13.43 billion.

Ross Gerber, an analyst at Gerber Kawasaki, said the latest figures suggest that the tide may be turning for Facebook and other social networks. This week, Colin Stretch, who led Facebook's investigation into Russian election interference and who testified before Congress last year on Facebook's behalf, said he would leave the company by the end of the year. It was the first full financial report since Facebook became embroiled in the Cambridge Analytica scandal in March. The company's head count has already risen 47 percent since past year, to 30,275.

Facebook's daily active users in Europe declined by 3 million amid the new regulation. The company was bombarded by public criticism over its content policies, especially in countries such as Myanmar and Sri Lanka where misinformation has led to violence.

"So far, there has been no evidence that shows that controversies, such as the spread of fake news, Russian interference in the USA elections, and the Cambridge Analytica scandal, have prompted advertisers to divert ad dollars", says Haris Anwar, senior analyst at Investing.com.

Facebook said that it brought in adjusted earnings of about $1.74 per share for the period, which was two cents ahead of the Wall Street consensus estimate of $1.72 per share, according to Thomson Reuters.

"The core Facebook platform is declining", said Brian Wieser, an analyst at Pivotal Research Group. The company's user base flatlined in its biggest market, the US and Canada, at 185 million daily users, while declining 1 percent in Europe to 279 million daily users. Overall, average daily users increased 11% from the period a year earlier.

The results marked a rare disappointing day for investors in Facebook, which for years has regularly beaten analysts' expectations for revenue growth and profit margins despite concerns about the long-term impact of privacy scandals. Analysts projected $13.3 billion.

But there's also been a notable slowdown in user growth.

Facebook's founder is the media company's largest shareholder, with 12.8% of its shares outstanding. Facebook has largely saturated in the U.S. and Western European markets, and is now looking to countries such as Brazil, India and Indonesia for new users. In North America, an effort to get all political advertisers to verify their identities may have halted some purchases as the company worked through its broad definition of what's considered "political". It owns three other properties with more than 1 billion users: WhatsApp, Messenger and Instagram. They were also expecting 2.25 billion monthly active users for the quarter. The company doesn't break out Instagram's revenue.

Shares in the technology company and publisher plunged by nearly 25 per cent in late trading after David Wehner, chief financial officer, said that Facebook's revenue growth would decelerate in the second half of the year and expenses would soar in 2019.

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