Facebook's 20%, $120B 1-day stock drop worst in USA history

Randal Sanchez
July 28, 2018

Those European privacy regulations, known as the General Data Privacy Regulation, or GDPR, went into effect with just one month left in the second quarter. At that point, the stock was still recovering from an earlier battering over its big privacy scandal, in which a political consulting firm with ties to President Donald Trump improperly accessed the data of tens millions of Facebook users.

Rahul Shah, chief executive officer at Ideal Asset Management in NY, a Facebook shareholder, said executives were trying to reset expectations about growth but the outlook caught Wall Street by surprise.

The stock drop, to its lowest levels in almost three months, wiped out almost $120 billion in market capitalization for Facebook and dragged down other internet and tech stocks including Twitter and Snap.

Much ground has been lost in the short span of 24 hours - a fall from which Facebook will have to work hard to recover. The Facebook CEO saw his net worth tumbled by $20billion, a record drop, taking him down four spots in Forbes' World Billionaires List.

Facebook share prices dropped nearly 20 percent Thursday.

Facebook shares and the personal fortune of Mark Zuckerberg took massive hits as the social network felt the impact of a growth slowdown and the fallout of recent privacy scandals.

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.

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The company's second-quarter revenue - $13.23 billion - missed expectations by about $70 million.

"Given this more cautious outlook, we are lowering our estimates and reducing our price target to $205 from $225", Monness Crespi Hardt Analyst Brian White announced Thursday in an investor note, according to Fox News.

"A lot of value investors might jump in and support the stock at these levels.it's probably a good buying opportunity for a long-term investor, but I wouldn't be jumping in with both feet today", he said. "As such, we would be aggressive buyers of the stock on weakness this morning".

Shares in other technology companies were dragged down by the social media giant, as the technology sector fell 1.9%.

Facebook shares fell another 0.8 percent on Friday, closing at $174.89 on the Nasdaq. However, average revenue per user in the region rose despite the lack of growth.

"As we have written about extensively, the advertising industry - and digital advertising no less - has limits to growth, which we think is the primary factor constraining Facebook's revenue opportunity", Wieser said in a note after the earnings.

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