Facebook’s stock plummets on worries about its user and revenue growth

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A data-analytics dustup that dominated much of the year and lingering questions about how it handles misinformation dinged the social-networking juggernaut on Wednesday, sending its shares into a tailspin in late trading.

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

Wall Street didn't take too kindly to that: Facebook's stock price dropped almost 20 percent in after-hours trading.

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. On today's call, however, Facebook executives said they expect revenue growth compared to past year to be lower especially as we get into the rest of 2018.

The company earned $5.1 billion, or $1.74 per share, up 31 percent and above analysts' estimates of $1.71. Analysts projected US$13.3 billion.

Looking ahead to the rest of 2018, Facebook CFO Dave Wehner warned that revenue growth for the third- and fourth-quarters would decelerate in the high-single digits because of factors that include more data privacy options and the promotion of newer initiatives like Stories and Watch that could impact revenues growth. Facebook reported its slowest growth rate ever, with 2.23 billion people logging in at least once a month in June, below the 2.25 billion analysts expected.

Facebook CEO Mark Zuckerberg could slide to sixth place from third on the Bloomberg Billionaires Index if the downward
Facebook shares fall as user growth slows

Strong ad sales from Google, which is Facebook's main competitor for online advertising, had sent expectations for the social network's earnings up, along with its stock price.

Facebook also missed the revenue projections of most analysts for the second quarter. Despite the fact that the company earned $5.106 billion in profit and revenue was up 42 percent year-over-year, the stock was down. Facebook had 279 million daily users in the region in the second quarter, down from 282 million in the prior quarter, amid the rollout of sweeping new data protection regulations there.

"The market was expecting a lot more", Wieser says.

Facebook also made changes to improve transparency about advertising, including tightening the rules around political advertising and launching databases showing what ads pages have run. 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. But once Wehner revealed the slow future revenue growth expectations, the stock fell further. He said the challenges included regaining public trust as well as increasing the number of people joining Facebook and the time they spent on the platform.

Shares tumbled 20 percent subsequent to the company reporting its second-quarter earnings - after the market closed.

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