Facebook stock dives 19%, shedding $120 billion in market cap

SAN FRANCISCO — Facebook shares dove 19 percent Thursday, with the social networking giant shedding about $120 billion in market value after the company warned of slowing sales growth.

The decline marked Facebook’s largest stock market decline ever, eclipsing a 12 percent drop on July 27, 2012. And the loss could be historic, as it would be the biggest stock-market wipeout for a U.S. company ever, according to Bloomberg. The previous largest loss of value in one day: $91 billion, which Intel lost in September 2000.

Other tech stocks sold off, too, Thursday with Facebook competitors Twitter and Snap down 3 percent and 2.5 percent, respectively.

Chief financial officer David Wehner triggered the selloff when he said Facebook’s sales growth would continue to slow through the rest of the year. Shares, which had already declined 7 percent after hours, then tumbled further after the comments on a conference call with analysts.

The personal wealth of Facebook co-founder and chief executive Mark Zuckerberg took a major hit. He lost $16.8 billion in extended trading. If that loss holds through Thursday’s close, he will slip to sixth place from third in the Bloomberg Billionaires Index.

Despite the steep drop of one of Wall Street’s long-time market leaders, its pain did not spill over to the broader U.S. stock market. The broad Standard & Poor’s 500 stock index, which includes Facebook and 499 other big U.S. companies, was down less than 0.2%.

The Dow was up by nearly 150 points. Only the tech-packed Nasdaq was dragged down by the social media stock’s troubles, falling 1%, with a big chunk of the losses due to Facebook’s 18% plunge.
 
Despite fears that the other so-called FAANG stocks – which include Facebook, Apple, Amazon, Netflix and Google parent Alphabet – would be infected by Facebook’s weak forward outlook, those fears were not realized. Apple and Google were trading flat in early trading, while Amazon fell more than 1% and video streamer Netflix dipped 0.7%.

Facebook’s sell-off points to growing concerns that Facebook will not emerge unscathed from the many controversies it faces.

The stock slide began right after Facebook reported second-quarter results after the market closed Wednesday. It was the first full financial report since Facebook became embroiled in the Cambridge Analytica scandal in March. Shares, which hit a record high Wednesday, plunged as much as 11% after Facebook posted the results. 

The problem: weaker-than-expected revenue growth, Facebook’s first such miss since 2015. It recorded sales of $13.23 billion for the three months ended in June, short of the $13.3 billion Wall Street anticipated.

Also alarming to investors: Facebook’s growth is slowing with users in some of its most lucrative markets. Facebook reported its slowest growth rate ever, with 2.23 billion people logging in at least once a month in June, below the 2.25 billion analysts expected.

Growth in the number of users who logged in each day fell short, too, up 11 percent year-over-year at 1.47 billion but still less than the 1.49 billion anticipated. Daily usage was unchanged in Facebook’s biggest market, the United States and Canada, at 185 million daily users. Facebook saw a decline in Europe to 279 million daily users. 

Net income was $5.11 billion, or $1.74 a share, beating analysts’ estimate of $1.71 a share.

Facebook used to be made out of corporate Teflon. Controversies came and went, but nothing stuck. And it seemed Facebook would shrug off the recent rash of scandals, too — Russian election interference, the mishandling of as many as 87 million people’s personal information by Cambridge Analytica and the unchecked spread of fabricated news.

Even after Facebook CEO Mark Zuckerberg was hauled in front of lawmakers on both sides of the Atlantic and federal agencies began to probe Facebook, prompting calls for increased regulation, investors and advertisers were undeterred, propelling the stock to new highs.

On Wednesday the initial fallout from Cambridge Analytica appeared in Facebook’s financial results and forecast and it was a game changer.

Pivotal Research Group analyst Brian Wieser, who has a sell rating on the stock, says there are limits to growth in digital advertising, even for Facebook.

“Deceleration such as management guided towards suggests that, while the company is still growing at a fast clip, the days of 30% plus growth are numbered,” Wieser wrote in a research note.

USA TODAY reporters Mike Snider reported from Tysons Corner, Virginia; Adam Shell contributed from New York.

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