Wen / sina science and technology Jiang Yiqun
Facebook share price "big dive"
Early in July 26th, Beijing time was the end of the us close. If you are a classmate of the US stock market and buy Facebook shares, the stock price chart you will see after you get up early will definitely make you feel muddled.
(Facebook) stock price chart for a day (up to 17:52 July 26th at Beijing time, source: Google)
About 3-4 p. m. local time in July 25th, Facebook shares fell off the cliff, a little steady for a while, and was a "cliff" after 5 p.m. In this way, Facebook's share price dropped to $173.5, or 20.23%, from close to $217.5.
In Xiaolan's impression, the decline in US stocks should have never been seen.
Until the morning of July 27th in Beijing, Facebook shares did not rise much in the intraday transaction. At the end of the $176.26, the drop was 18.96%.
(Facebook) price chart for five days (up to 10:10 July 27th Beijing time, source: Google)
According to CNBC reports from the US financial media, nearly 19% of the decline is the largest single day decline in the US stock market.
In history, no company in the US stock market lost $100 billion in market value within a day, even when the "Internet bubble" broke out 17 years ago, and no listed company had such a big market value loss in a day.
The largest single day market loss ranking in US stock market (source: FactSet)
Facebook's plunge also affected CEO Mark Zuckerberg's wealth. Zuckerberg lost $15.9 billion of net worth this time, falling from No. 3 on the rich list to No. 6, according to the Bloomberg billionaire Index.
Zuckerberg ranked sixth in the fortune list (up to July 27th local time, source: Bloomberg billionaire index)
At the same time, Facebook "diving" is also tilting with other technology stocks. Amazon, Netflix and Google's parent company Alphabet fell nearly 1% after trading on Wednesday. Facebook's rivals Twitter and Snap fell 1.7% and 0.8% respectively.
Why is Facebook stock so miserable?
The reason why Facebook shares have suffered such a big decline is that Facebook itself has made investors lose heart.
It said that at 3-4 p. m. local time on July 25th, it was the time after the closing of us shares. In fact, it was also the time for Facebook to announce the second quarter earnings and hold a conference call. From the perspective of stock price volatility, Facebook's earnings are dissatisfied with investors.
Indeed, Facebook's quarterly earnings report is dissatisfactory, especially on some key indicators, especially on some key indicators:
- Facebook's second quarter revenue was $13 billion 231 million, an increase of 42% over the previous year, a 12 month low of a year earlier. According to a previous survey by FactSet, a financial and financial provider, analysts expect an average Facebook second quarter revenue of $13 billion 340 million, which means that Facebook has been less than expected for the first time since 2015.
Net profit of $5 billion 106 million, an increase of 31% over the previous year, a 2% increase over the first quarter. But net profit rose 63% in the first quarter compared with the same period last year.
The operating profit margin was 44%, less than 46% in the first quarter and 47% in the same period last year.
In addition to the financial situation, the user number index is more worrying for investors.
- the average number of active users on Facebook as of June 2018 was 1 billion 470 million, but analysts expected 1 billion 490 million people on average; the number of active users on the day was only 1.44%, down from 3.42% in the last quarter.
- as of June 2018, the number of active users in Facebook was 2 billion 230 million, compared with an average of 2 billion 250 million analysts previously expected; the number of active users increased by only 1.54%, down from 3.14% in the last quarter.
The above data is summed up in one sentence, that is, the financial and operational conditions of Facebook are not as good as expected, and the growth is not as good as before.
In addition to the bad results, CFO CFO David Weiner (David Wehner) at the earnings conference "one more fix":
This quarter has increased by 42%, but we expect a decline in the percentage of higher digits in the next few quarters.
In general, the so-called "percentage of higher digits" refers to 5%-10%, while Facebook's quarterly revenue growth in the second half of last year is as high as 47%. In other words, the second half of the year Facebook revenue growth may fall below 40%.
This makes it hard for analysts.
As for Facebook's earnings and expectations so bad, the main problems lie in three aspects: users, revenue sources and cost expenditure.
On the above, we talked about the user number index which was annoying in the earnings report, and the growth rate of users was lower than before, and lower than expected. From a geographical point of view, the stagnation of the number of users appears mainly in two places: Europe and North America.
_Numberof active users per month on Facebook (source: Facebook)
From the above, the number of Facebook users in North America was 241 million, but it was the same number in the last quarter, while the number of active users in Europe was 376 million, 10 thousand less than the last quarter.
It can be seen from the figures in the figure that this may be the first time that Facebook has not increased or even declined since 2016.
This is obviously affected by a series of negative events such as the previous "Cambridge Analytica" (Cambridge Analytica) data leaks, leading to more stringent regulation (such as the EU's general data protection regulations), which also makes it difficult for users to trust the Facebook.
If you often pay attention to foreign technology news, you will know about the "Cambridge analysis" event. Facebook user data inflow into the "Cambridge analysis" and was misused, and finally forced Xiao Zha to confront the legislators of the United States and Europe.
Another point is more important: Facebook has basically absorbed almost all the users in Europe and America, and it will be difficult to increase substantially. Although the number of monthly users of Facebook in the Asia Pacific region is increasing, the stagnation of the base camp in Europe and America has made investors even more worried. And now 2 billion 230 million people are using Facebook, which is 2/3 of the Internet connected population in the world. Who can Facebook pull new users?
If Facebook wants to increase the number of users, there is another big market in Asia. But from the beginning of the "face book entry into China" this view is at least not realistic at least.
2. sources of cash change
Because North America and Europe have stagnated in the number of subscribers, Facebook must find ways to broaden the source of user liquidity. But this is also very challenging.
The first is regulation. Because privacy concerns are being noticed by more and more people, many European and American countries have (or planned) to strengthen their regulatory policies. For example, the Universal Data Protection Ordinance (GDPR) launched by the European Union has caused many difficulties to Facebook's advertisements.
For compliance and to reassuring users, Facebook has to optimize its privacy control, which may make it harder for Facebook to aim at the advertising audience or to display ads to more people so that the advertising revenue may fall.
The second is the transformation of the main push function. Facebook's applications have launched the Stories function of "burn after reading". The number of users of this function is also large -- Facebook main application is 150 million, Messenger is 70 million, Instagram is 400 million, WhatsApp is 450 million.
Facebook estimates that by 2019, sharing through the Stories function will exceed the sharing of message flows, which means that Facebook can be advertised from this function.
The problem is that Facebook is not quite sure how to add advertisements to it, and advertisers may be slower than users to accept this change.
The source of income has been reduced a little, and the future source of income has not yet been seen, and investors are worried.
3. cost increases
Or because of the "privacy scandal", Facebook increased investment in user privacy and security in the quarter. Facebook, for example, added 47% of its information auditors. You know, Facebook had only 20 thousand employees.
The increase in spending made the Facebook business profit margin down to 44%, the worst since the first quarter of 2017 and a direct result of a sharp drop in free cash flow to $2 billion 840 million, a period of $3 billion 920 million in the same period last year.
Facebook operating profit margin (source: Facebook)
Some people may say that Facebook is a technology company. Is it necessary to check information with human flesh? SureDevelopmentArtificial intelligence (AI) to do it!
In fact, Facebook used to use AI technology for auditing. Only if the current AI is useful, there will not be a series of scandals later. Facebook shares will not be so miserable because of this decline.
So Facebook is still getting into its own AI technology, plus investment in other technologies (such as virtual reality and augmented reality), as well as infrastructure and security, which seems to be out of sight.
When it comes to security, add another fact. According to the document published by the SEC, Facebook approved a $10 million per year pre tax allowance to help Zuckerberg hire security personnel, purchase, install and maintain a variety of safety devices to ensure the safety of Zuckerberg's house, including personal travel fees for personal travel...
So what will Facebook's future share price be?
Judging from the stock price trend of Facebook in the past year, Facebook has fallen very seriously this time, but it has not fallen to the lowest share price in nearly a year.
(Facebook) stock price chart for a year (up to 11:58 on July 27th at Beijing time, source: Google)
From the chart, this year's March 27th is the lowest share price of Facebook in the past year, when it was $152.22, but then it went up a lot. March 27th is the time after the outbreak of the "Cambridge analysis" incident.
Negative events like "Cambridge analysis" did not affect the trend of Facebook later. In this view, the adverse effects of this financial report should not affect the future of Facebook. After all, the business model of Facebook is proved to be effective, and the current scandal will not shake the foundation of Facebook.
That's what analysts think, too. According to Thomson Reuters data, of the 47 analysts who studied Facebook, 43 were still buying, two were holding, and only two were selling.
Facebook realized growth at any cost before, but it may have reached saturation point. How to cope with the social responsibility of such a large user scale, and avoid the recurrence of data leakage, is an important issue to be studied in the next step of Facebook.