Facebook stock tanked about 8% at this morning’s opening bell, wiping around $50 billion off the company’s market cap after yesterday’s post-closing-bell quarterly earnings call reported an earnings beat but a steep rise in expenses compared to 2018.
“We had a good quarter and a strong end to the year as our community and business continue to grow,” Facebook CEO Mark Zuckerberg said in a statement. “We remain focused on building services that help people stay connected to those they care about.”
Facebook closed at $223.31 on Wednesday and crashed all the way to $206.53, a dip of nearly 8%, by 9:30 a.m. EST’s opening bell.
The drop is attributed to a 51% increase in expenses that are mostly related to privacy and security improvements, pushing Facebook’s operating margin from 45% in 2018 to 34% in 2019. Facebook’s market cap fell $50 billion to about $598 billion on the news.
What Analysts Are Saying About Facebook
Several analysts lowered price targets on FB stock while positivity still remains.
“At first glance, no change to our positive thesis on Facebook, although the modest size of the revenue and EPS beat may disappoint some investors accustomed to bigger outperformance,” Baird Equity Research analyst Colin Sebastian wrote in a note to clients.
Facebook warned during its earnings call that advertising will take a hit because of coming privacy and regulatory changes, which will slow the company’s growth in the U.S. Privacy improvements on iPhone’s iOS and Android’s OS also could hurt its targeted advertising.
Facebook, Apple, Amazon and Google parent Alphabet are all the subject to an ongoing antitrust investigation.
These concerns are likely to continue through 2020, and CEO Mark Zuckerberg said privacy will be a key focus for the company this year.
“It’s going to take time but over the next decade, I want us to build a reputation on privacy that’s as strong as our reputation already building good, stable services,” Zuckerberg said.
It wasn’t a total loss for Facebook as earnings beat projections: $2.56 per share topped the projected $2.53; revenue of $21.08 billion beat projections of $20.89; daily active users came in at 1.66 billion compared to 1.65 billion projected; monthly active users hit right at the projection of 2.5 billion; and average monthly revenue per user came in at $8.52 compared to $8.38 projections.
“Overall, I feel confident about where we are (in regard to the 2020 election),” Zuckerberg said. “In 2016, we were behind where we needed to be (as far as security). The good news is that since then, there have been major elections across the world, and we have improved at quite a fast rate.”
Over the past 12 months, Facebook stock is still up nearly 50%. By comparison, the S&P 500 is up just over 20%.
Bottom line: This is likely a great opportunity to buy the dip.
