Published: Sat, July 28, 2018
Finance | By Cynthia Curry

Facebook is sued after stock plunge 'shocked' market

Facebook is sued after stock plunge 'shocked' market

"Although the Facebook platform is beginning to see slowing growth, the company's other products are still seeing dramatic growth", says Michael Pachter of Wedbush.

Facebook founder Mark Zuckerberg could lose his position as chairman of the firm.

Both the slower growth forecast and heavier spending reflect problems largely of Facebook's own making.

The "Dispatches" show featured an undercover reporter who went to work at Irish staffing firm CPL Resources, which acts as Facebook's largest centre for United Kingdom content moderation. But Facebook, which reported sales growth averaging 50 percent the past 10 quarters, may just be lowering the bar so it can win back confidence in future quarters. While the company posted an earnings beat, revenue was below analysts' guidance as the company raked in $13.23 billion in sales, below the $13.23 billion that analysts were calling for.

Its stock fell more than 8% on that news.

Facebook Chief Financial Officer David Wehner said on a conference call with investors that Facebook is "putting privacy first" after the Cambridge Analytica scandal triggered a wave of awful press, customer angst and regulatory scrutiny around the world.

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

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Of 47 analysts covering Facebook, 43 still rate the stock as "buy", two rate it "hold" and only two rate it "sell". Within minutes it was down 15%, then 18%, then 24%.

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.

In the Facebook stock sell-off, Zuckerberg lost almost $16 billion in personal wealth and some shareholders believe it's time the 34-year-old lost even more: his job.

National Religious Broadcasters President Jerry Johnson told CBN News in an April interview that Facebook should apply the First Amendment to questions of speech; otherwise, he fears Christian and conservative voices will be silenced. Its overseas revenue got a boost in dollar terms as the dollar appreciated against other currencies a year ago. A Facebook spokesman declined to comment. It was believed to be the worst ever single-day evaporation of market value for any company.

"We're investing so much in security that it will significantly impact our profitability", Mark Zuckerberg said.

As analysts pounded Facebook executives on the call about the company's expected deterioration in its financial results, its stock continued to sink.

"We think that's the right thing to do for the business", he said. The decline in Facebook's market value was roughly equivalent to the entire value of some of the country's best-known companies, including McDonald's, Nike and industrial conglomerate 3M. A few short hours later, that already seems like a distant memory.

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