Facebook, Inc. (NASDAQ: FB) is one of those stocks that you never expect to see monumental declines out of. After all, the company has built itself to become a household name. Nonetheless, regardless of all the work that the company has done, it is seeing dramatic declines in the market today after missing the mark with regard to revenue for the first time since 2015 and guiding sequential declines! Of course, upset investors are sending the stock tumbling. Today, we’ll talk about:
- The Facebook earnings report;
- what we’re seeing fromt he stock as a result; and
- what we’ll be watching with regard to FB ahead.
FB Reports Financial Results
As mentioned above, Facebook is having an overwehlmingly rough start to the trading session this morning, dragging the tech sector as a whole down with it. The declines are ultimately the result of a horrible earnings report. Here’s what we saw from the report:
- Revenue – In terms of revenue, FB missed the mark in a big way. During the quarter, the company was expected to generate revenue in the amount of $13.34 billion. Unfortunately however, the company only generated $13.23 billion, missing on revenue expectations for the first time since the year 2015.
- Earnings – While revenue was a big negative, earnings proved to be a positive point. During the second quarter, the company generated earnings in the amount of $1.74 per share. Analysts expected that FB would generate earnings in the amount of $1.71 per share.
- Guidance – This is where the company took the biggest hit. On the earnings call, Facebook guided for more declines. In fact, the company said that revenue growth is expected to drop by high-single digit percentages sequentially in both Q3 and Q4. Not to mention, the company expects that its operating margin will eventually trend to the mid 30% range. Current operating markets are wel above this figure at around 50%.
Ultimately, the poor quarter and poor guidance were blamed on increasing costs associated with concern over the mis-use of customer data and privacy concerns linked to the Cambridge Analytica scanda that was revealed earlier in spring.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news causes moves. In the case of Facebook however, the news was anything but positive. The company, looked at as one of the strongest on the market with a strong track record of great earnings reports produced a big surprise today, and it wasn’t a good one. Of course, investors are upset by the report, sending the stock tumbling down. As is normally the case, our partners at Trade Ideas were the first to alert us to the declines. Currently (8:34), FB is trading at $173.01 per share after a loss of $44.49 per share or 20.46% thus far today.
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What We’ll Be Watching For ahead
Moving forward, the CNA Finance team will continue to keep a close eye on FB. In particular, we’re interested in following the story surrounding the company’s continued declines. With expectations that revenue will decline sequentially for the third and fourth quarter, this is definitely going to be something to watch. Nonetheless, we’ll keep a close eye on the news and bring it to you as it breaks.
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