Fearless millennial investors are piling into Facebook after its earnings plunge (FB)

Jul 27, 2018, 10:42
Fearless millennial investors are piling into Facebook after its earnings plunge (FB)

Facebook Inc.'s scandals are finally hitting the company where it hurts the most, its growth.

In response, Facebook's stock tumbled more than 23 percent in after-hours trading, erasing more than $120 billion in market value in less than two hours.

Facebook has largely saturated in the US and Western European markets, and is now looking to countries such as Brazil, India and Indonesia for new users.

That changed on Wednesday, when Facebook missed revenue estimates, offered a weak sales forecast for future quarters and reported a decline of users in Europe.

Company shares fell 19 percent Thursday. Fun fact: Facebook's loss of $150 billion after hours on Wednesday eclipsed the $124.3 billion GDP of Hungary.

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Of 47 analysts covering Facebook, 43 rate the stock as "buy", two rate it "hold" and two rate it "sell".

"Many analysts were rather dumbstruck on the conference call, with some stammering a bit as they asked questions trying to get their heads around a decline in revenue-growth that had always been presaged but never actually arrived", Poletti wrote. Stamos reportedly still plans to leave the company next month, following a reorganization that the New York Times said earlier this year took away 98% of the group he managed. Facebook is rolling out a version of those protections to the rest of the world.If users choose to share less data with Facebook, that could hamper the company's ad-targeting abilities, making it less attractive to marketers.

The way the Facebook bulls describe it, however, is that the company is doing this on goal, and any near-term pain is - harumph - just a flesh wound.

Facebook didn't respond to a request for comment.

"Facebook is actively choosing to make less money, deprioritizing near-term monetization to drive engagement to even higher levels", Greenfield said in a note to clients.

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The company warned its investors that a huge financial injection would be required to buttress the business to address the controversies it's now facing, with revenue growth expected "to decline by high single-digit percentages from prior quarters".

Some investors were also dismayed with Facebook's revelation about Instagram Stories, which allow users to post videos or photos that disappear after a day.

"T$3 he fundamental damage to the Facebook platform has been "very contained" in our opinion and is generally better than feared from the white-knuckle period a few months ago", he added.

"We were pretty stressed out during Facebook's Q2 2018 conference call and could sense the fear/panic in investors voices afterwards", he writes. Daily usage was unchanged in Facebook's biggest market, the United States and Canada, at 185 million daily users.

"Mobile is eating the world and Facebook is a core holding to benefit from that shift", he said.

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"The company has a track record of resetting revenue growth and expense expectations only to turn around and exceed those expectations the following quarter", said Gene Munster of Loup Ventures.