Facebook's Shares Take #Plungega Challenge
Facebook's Stock Fell Off During the Company's Earnings Call

Facebook founder and CEO Mark Zuckerberg got a shocking news just when he announced an optimistic news with his financial analysts on a conference call on Wednesday. According to the new statistics, a quarter of the world’s population that is approximately 2.5 billion people now use as a minimum one of the Facebook’s apps every month.

However, the astounding piece of data wasn’t sufficient to divert the shareholders from the shocker that company had to reveal- the company’s revenue growth rates and operating margins is expecting a significant decrease in the coming years.

The proof lays in Facebook’s stock, which went down as much as 24% from its price at the close of regular trading during the call. As a matter of fact, the phone call with Zuckerberg and his colleagues only worsened the things for Facebook, concerning its share price.

Facebook had announced the disappointing second-quarter financial results an hour before the call started. The California based company had let down Wall Street’s anticipations regarding its number of daily and monthly users, and revenues.

With the Wall Street’s disappointment, Facebook’s stock fell more than 8%. It stayed relatively stable until the call started with David Wehner, Facebook’s chief financial officer. He forecasted that Facebook’s operating margin will experience a fall by 44% and its revenue growth to slow down by the 42% pace it published in the Q2.

Mr. Wehner further said, “Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019. “Over the next several years, we would anticipate that our operating margins will trend towards the mid-thirties on a percentage basis.”

Facebook’s shares dropped rashly, during the call. Within a few minutes it tumbled by 15%, then 18%, and then more than 24%. At the stock’s rock bottom, more than the entire market cap of IBM ($134 billion) that is $148 billion of the company’s value – significantly – had been wiped out.

The three major factors that contributed towards Facebook’s revenue growth decline according to Wehner are as below:

  • It’s struggling while combating currency gusts

Although Facebook’s overseas revenue got a hike in dollar stipulations as the dollar escalated against other currencies last year, its value will see a substantial decline this year due to dollar’s fall off.

  • Emphasizing Stories

The new Stories feature that has been copied shamelessly from Snapchat, has proved to be totally waste as it does not make money from its Stories feature as from its other features on its site and news feed.

  • Increased focus on privacy and security

Zuckerberg had previously cautioned the cons of increased focus on security and privacy on the company’s profitability. The alternative options that the company is offering its users are to opt out of some data collection- enthused by a new privacy law in Europe- may cost them less advertising revenue.

Wehner forewarned analysts about the company’s financial results as it will take some time to be on track. He further added that the company will be displaying below par operating margins for “several years … more than two, less than many.”