Coverage: Facebook shares fall 24 percent after bad earnings

Facebook Inc.’s stock fell as much as 24 percent after hours on Wednesday over concerns about the impact of privacy issues on the social media company’s business, with executives warning that revenue growth would slow and expenses would rise.

Munsif Vengattil and Parseh Dave of Reuters had the news:

The plummeting stock price wiped out about $150 billion in market capitalization in under two hours.

The company had cautioned investors to expect a big jump in costs because of efforts to address concerns about poor handling of users’ privacy and to better monitor what users post. Total expenses in the second quarter surged to $7.4 billion, up 50 percent compared with a year ago.

“Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4,” said Chief Financial Officer David Wehner.

Glenn Fleishman of Fortune.com reported that Facebook failed to grow in important markets:

Investors’ alarm was likely triggered by a failure in growth in its most important markets, the combined U.S. and Canada segment and Europe. U.S. and Canadian traffic was flat from the previous quarter, while Europe shed 3 million average daily users quarter over quarter, down to 279 million.

U.S. and Canadian Facebook visitors provided an average revenue per user (ARPU) in the latest quarter of $25.91, the vast majority from advertising, while the ARPU of Europeans was $8.76, according to figures provided by Facebook. Other markets offer much less value: Asia-Pacific users rack up just $2.61 in revenue, and the rest of the world lumped together, a mere $1.91.

The drop in European visitors was potentially due to the continuous revelations highlighted there about Facebook’s breaches and weaknesses, and the implementation of the European Union and related entities’ General Data Protection Regulation (GDPR) in late May. The GDPR requires more disclosure and opting in to many tracking and ad-related behaviors that aren’t related to the core function of a website.

Sarah Frier of Bloomberg News reported that Facebook’s daily active users were below forecast:

Facebook said it had 1.47 billion daily active users in June, compared with the 1.48 billion average of analysts’ estimates compiled by Bloomberg. The company’s user base was unchanged in its biggest market, the U.S. and Canada, at 185 million daily users, while declining in Europe to 279 million daily users. Overall, average daily users increased 11 percent from the period a year earlier.

Facebook’s shares had earlier closed in New York at $217.50, a record high, and had gained 23 percent this year.

The Menlo Park, California-based company reported net income of $5.11 billion, or $1.74 a share, compared with analysts’ average estimate of $1.71 a share, according to data compiled by Bloomberg.

The social network, in spite of the drama of the past few months, still holds one of the world’s most valuable sets of data on what people are interested in, and makes that audience easily available to advertisers.