The Fall of Facebook

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Things get gloomy for an American social media giant. Facebook, once an undisputed industry leader and investors’ favorite, has lost 20% of its value in after-hours trading. The reason for an unexpected hit is trite: the earnings report, released yesterday, delivered lower than expected revenue and demonstrated slowing user growth. FB shares had lost 7% the moment the report was released. As the conference call unfolded, Facebook dropped even further. At one point, FB shares have been traded at around $168, the lowest point since April 25.

FB shares have dropped to $168 in after-hours trading

Our total revenue-growth rates will continue to decelerate in the second half of 2018, and we expect our revenue-growth rates to decline by high-single-digit percentages from prior quarters sequentially in both Q3 and Q4,” said Chief Financial Officer David Wehner. It is his message that is believed to have trigger the meltdown. Growing expenses do not add to the financial performance of Facebook, as the head count of the company has increased 47% (up to 30,275) since the last year. As acknowledged by the company officials, tougher security measures, implemented as a response to a numer of political scandals, divert the cash flow and hinder further growth.
Sharp stock price movements tend to create lucrative trading opportunities

Now to the most important and interesting part. What you, as a trader, should expected from the Silicon Valley behemoth in the upcoming hours and days? High-tech companies are traditionally seen as more volatile than conventional businesses, as they can gain and lose dozens of percent in a relatively short time. Although there is nothing particularly good in the most recent price decline, especially for long-term FB shareholders, the share price is quite likely to rebound (at least, partially) in the next few days. Further negative movement, however, cannot be ruled out completely, as investors were clearly left dissatisfied with last quarter results.
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