Facebook Inc and its chief executive Mark Zuckerberg were sued on Friday (July 27) in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about US$120 billion (S$163.43 billion) of shareholder wealth.
On a call with analysts, Facebook advised it expected its revenue growth rates to be lower than the year prior, especially in the second half of this year.
Its shares jumped to a new record after it reported that its quarterly profit soared past US$2b, trumping analysts' expectations, as its online shopping, cloud computing and advertising businesses continued to grow.
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. Not only that but Facebook has had concerned citizens of the world question its privacy, data collection, and its stance on fake news, and hate speech.
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Facebook (NASDAQ:FB)'s European user base declined by 1 million users and as mentioned above, growth remained static in the United States and Canada.
Of 47 analysts covering Facebook, 43 still rate the stock as "buy", two rate it "hold" and only two rate it "sell".
Even though almost one-third of the entire planet uses Facebook, that user number and the revenue figure came in a shade below Wall Street forecasts, prompting the after-hours selloff. But the results followed a period in which data-privacy issues came under harsh scrutiny, with Zuckerberg testifying before Congress for hours on the company's missteps.
In Q2, Facebook's total revenue growth rate dropped about 7 percentage points compared with Q1.
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The site also brought in 1.47 billion global daily active users (DAUs) during its second quarter, below the 1.49 billion that analysts were projecting, according to a StreetAccount and FactSet outlook. But the shedding is still notable because Facebook, until now, has only ever experienced growth in users quarter-to-quarter.
Costs in this area rose by around a half compared to the same period previous year.
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. And the company told Wall Street the numbers won't get any better this year. Eastern time. Snap's shares were down by more than 2 percent. Without knowledge on what demographic the three million European users who abandoned the service fit into, it's hard to know just how easy it'll be for Facebook to win them back.
After having weathered all of the above, declining financial growth and static user growth has finally resulted in a major investor panic.
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