Facebook (FB) Stock Sinks as Revenue Misses Expectations

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

Rahul Shah, chief executive officer at Ideal Asset Management in NY, a Facebook shareholder, said executives were trying to reset expectations about growth but the outlook caught Wall Street by surprise.

Facebook reported a 42 percent increase in revenue and a 31 percent jump in profits for its second quarter, compared with a year earlier.

Nasdaq futures dropped 0.85 per cent late on Wednesday, suggesting the technology-heavy Nasdaq Composite index would fall when trading opens on Thursday morning. Although Facebook was trading a shade over $150 after the Cambridge Analytica Scandal, it now sits just over $175.

Facebook's daily active users for the second quarter of 2018 were effectively flat in the USA sequentially, and even declined in Europe compared with Q1 - marking the first time the company has seen such a decline in recent quarters.

Of 47 analysts covering Facebook, 43 still rate the stock as "buy", two rate it "hold" and only two rate it "sell". It reported revenue of $13.2 billion for the quarter, missing Wall Street estimates and rattling investors. "We run the company for the long term, not just for this quarter", he said.

The change was due to the European Union implementing the General Data Protection Regulations, which imposed new rules on how internet companies store customer data.

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The key metric of monthly active users rose 11 percent to 2.23 billion, below most estimates of 2.25 billion, while daily active users grew a weaker-than-expected 11 percent to 1.47 billion.

Many are pointing the blame at founder and CEO Mark Zuckerberg. "Facebook's algorithm has been destroying media companies lately, especially the smaller ones - and even more so - those that lean conservative". Amazon Web Services sales hit $6 billion, marking a yearly growth rate of nearly 50 percent, while the segment's profit was $1.64 billion.

And for those hoping for a swift bounce back, the company told Wall Street the numbers won't get any better this year.

Now we have real-life advertising from Facebook saying it's concerned, and looking after our privacy. Twitter was down 6 percent, Amazon and Google 2 percent and Apple 1 percent.

On Thursday afternoon, Facebook watched its capitalization drop by $119 billion, lowering its valuation to $510 billion, which represents a 19 percent drop, according to CNBC. They believe users have woken up to Facebook's growing list of controversies and chose to vote with their "Log Out" buttons.

Wehner gave three different reasons why the company's revenue growth would decline: currency headwinds, greater investments in new kinds of content-sharing, like disappearing videos, and greater user control over privacy - a direct response to criticism the company has fielded.

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