Facebook’s stock price plummeted 20% overnight July 25, 2018 after the company reported 2Q18 earnings.
As of noon on July 26, Facebook stock is still trading down about 20%. What happened?
For the first time since 2015, social media and tech giant Facebook fell short of estimates. The stock dropped 7% immediately after Facebook released earnings on July 25, 2018. But it wasn’t until the company’s CFO David Wehner announced that he expects their revenue slowdown to continue that Facebook fell an additional 13%.
CEO Zuckerberg attributed the quarterly loss to their increase in spending on security measures. The results followed an eventful quarter for Facebook. There was the fallout of the spread of Russian propaganda on its site, the Cambridge Analytica scandal, and controversy over how it moderates disinformation.
Some key stats from Facebook’s 2Q report:
- Revenue: $13.23 billion vs. $13.36 billion Bloomberg estimate
- Earnings per share: $1.74 topped $1.72 estimate
- Global daily active users (DAUs): 1.47 billion vs. 1.49 billion expected
- North American DAUs: 185 million vs. 185.4 million estimated by FactSet
- European DAUs: 279 million vs. 279.4 million, according to a FactSet estimate
- Average revenue per user (ARPU): $5.97 vs. $5.95 in estimates
More unfortunate news: In Europe, Facebook (FB), which owns both WhatsApp and Instagram, saw a steep drop in user growth following the European Union’s (EU) “General Data Protection Regulation” (GDPR). The GDPR is a regulation in EU law on data protection and privacy. Analysts expected it would bolster FB’s earnings in Europe (thinking, wrongly, that its size would allow them to comply with regulations more easily than smaller firms). What happened instead: the regulation lead to a drop of 3 million daily users and 1 million monthly users since the first quarter.
We wanted an investor’s take on the news, so iBillionaire spoke with Argentine entrepreneur Martín Varsavsky, founder of Medicorp Sciences FON Wireless Limited and more.
A great buy opportunity
Varsavsky’s take: “The Facebook drop is a market over-reaction, a great buying opportunity. Instagram is growing tremendously and remains to be better monetized and WhatsApp monetization hasn’t even started.”
Read more on Facebook’s drop below. “Buy the dip” is frequent advice when a well-established company or market takes a sizable hit.