Facebook is sued after stock plunge 'shocked' market

Adjust Comment Print

In September 2000, during the original dot-com bust, Intel lost $91 billion while around the same time Microsoft lost $77 billion in a day.

Facebook lost about $130 billion in market value in just two hours, its steepest stock decline ever, and the personal wealth of Facebook co-founder and chief executive Mark Zuckerberg also took a major hit, Mark Zuckerberg lost almost $17 billion in just two hours on Wednesday. Indeed, the drop Thursday morning was sharper than the multi-day stock slide in March following revelations of data misappropriation by Cambridge and others.

Siva Vaidhyanathan, a media studies professor at the University of Virginia and author of the new book, "Antisocial Media: How Facebook Disconnects Us and Undermines Democracy", dismissed the significance of the stock plunge. Piper Jaffray hiked their outlook to $2,100 from $2,075 and Wedbush raised its price target to $2,100 from $1,800. "In our view, the sell-off is overdone and largely unwarranted".

The company also said revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns, would not be enough to fix the damage.

Michael Connor, whose Open Mic group helps investors push tech companies to address privacy, abuse and other issues, said it's "far too early" to see if Facebook's efforts to improve itself will prove fruitful.

The stock market collapse came after the company warned investors to expect a significant decline in growth rate, and revealed that the number of users in Europe had fallen from 282 million to 279 million.

Facebook's grim forecast predicts that margins will be much lower for the next few years due to "more choices around data privacy" as well as currency market predictions and the GDPR, according to a statement made by Facebook CFO David Wehener during the earnings call.

Mark Zuckerberg is also counting the cost of user disenchantment with Facebook.

Read the full story at Fox News. "GDPR is an added head wind, albeit containable", he said.

Declining user growth, growing privacy awareness, and dwindling advertising profitability all seem to indicate trouble for the company in the future.

Also alarming to investors: Facebook's growth is slowing with users in some of its most lucrative markets. Yet both categories are facing headwinds.

"The company has a track record of resetting revenue growth and expense expectations only to turn around and exceed those expectations the following quarter", said Gene Munster of Loup Ventures.

"Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis", he explained.

So is it time to unfriend Facebook?