Facebook’s (FB) fundamentals were shining bright and outweighed its data misuse scandal from months’ prior leading into its Q2 earnings. In the wake of mishandling user data, Facebook’s stock tumbled from $195 to $152 or 22%. Facebook was well off those data misuse induced sell-off lows and marched right through its previous 52-week high and broke out to $219 for a nice ~44% rebound. This scenario ended abruptly on the heels of its Q2 earnings which came in shy of analysts’ expectations on the revenue front. Facebook also issued a major guide down in growth for the next few quarters tampering growth expectations in the near term. Facebook is facing a challenging confluence of slowing revenue growth, margin compression and stagnant daily active users in the near to intermediate term. Facebook’s CFO stated that investors could expect "revenue growth rates to decline by high single-digit percentages from prior quarters." Despite these headwinds, Facebook is still posting accelerating revenue growth across all geographies, expanding market penetration with Instagram’s IGTV, Facebook’s Stories and monetization efforts in Messenger and WhatsApp. Factoring in this high single digit decrease in revenue, Facebook is still poised to grow at a double-digit clip with the most recent growth rate coming in at 42% in Q2. The long-term picture looks bright for Facebook, and the recent sell-off is a good opportunity to initiate a long position as the company contends with and addresses all the issues across its platforms. Facebook remains a premier large-cap growth stock and inexpensive relative to other large-cap growth stocks in its cohort.
Disastrous Conference Call
Well, that was a disaster of a conference call. Facebook posted the largest one-day loss in market value by any company in stock market history. Facebook shed $119 billion worth of market capitalization after dropping ~20%. No other company has ever lost greater than $100 billion in market value in a single day (Figure 1). To add insult to injury, this was also Facebook’s worst day ever on the stock market. This sell-off came on the heels of a minor Q2 advertising revenue miss of $13.04 billion versus expectations of $13.16 billion and lower than expected daily active users in Europe. Key metrics suffered from data misuse and fake news issues within its platform. Continue reading "Facebook - $119 Billion Disastrous Conference Call"