Facebook in record plunge after shocking growth report

Facebook shares sink 8% as Q2 revenue and user growth misses analyst estimates

The report was a relief to investors in the U.S. technology sector, still reeling from a profit warning by Facebook Inc Wednesday that plunged its stock 19 percent.

In September 2000, during the original dot-com bust, Intel lost $91 billion while around the same time Microsoft lost $77 billion in a day.

"Despite facing important challenges, our community and business are off to a strong start in 2018", said Mark Zuckerberg, Facebook's founder and CEO.

Facebook's shareholders and investors began unfriending the social media platform after the company's chief financial officer, David Wehner, predicted that revenue growth would continue to be slow for a while, sending Facebook share prices plummeting as much as 24%. All told, the US$119 billion of its value that was wiped out is worth almost as much as McDonald's. Their median target price is $219.30. "In our view, the sell-off is overdone and largely unwarranted". The company is also contending with European privacy rules that went into effect in May. That surprised investors because of the belief that the new laws wouldn't hurt revenue.

The biggest blow to traders was the fact that there had been no growth in daily active users.

The second quarter of 2018 was the first full accounting period following the exposure of the Cambridge Analytica scandal in March.

Facebook has faced dozens of lawsuits over its handling of user data in a scandal also concerning the United Kingdom firm Cambridge Analytica. Like Facebook, Instagram depends on ads to generate revenue, and Stories is supposed to help sell more ads.

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Richard Windsor, a technology analyst who writes the Radio Free Mobile blog, said the new outlook should not be surprising.

For more than a year - ever since Zuckerberg published a 5,000 word manifesto arguing that Facebook needs to make the world a better place by bolstering civic engagement and addressing social ills - the company has seemed torn between its philosophical mission and its economic one. Yet both categories are facing headwinds.

"Our total revenue growth rate decelerated approximately 7 percentage points in Q2 compared to Q1", he said.

Amazon Web Services (AWS), the company's must lucrative unit, saw its operating profit margin expand from a year earlier.

So is it time to unfriend Facebook? All investments can fall as well as rise in value so you could get back less than you invest.

Richard Greenfield of BTIG Research said he remained upbeat on Facebook despite the abrupt forecast shift. At present, Facebook has 1.47 billion daily active users and 2.23 billion monthly active users. "Legacy media executives. should not be rejoicing - they should be afraid, very afraid".

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