Facebook Shares Drop Sharply After First Earnings Reports Released
Facebook’s shares took a beating in afterhours trading on Thursday, July 26, after the social network released its first earnings reports. This was the first time the publicly trading company was delivering an earnings reports after its much hyped debut on the stock market in May. The market did not react favorably to the news that Facebook’s revenue from sales had slowed down and that the company had slimmer profit margins. The situation was compounded by the fact that the California based company management gave no forecasts of future sales or how they planned to boost revenue from advertising.
The latest data fed into investors fears that the company has been over valued and that its actual stock price should be lower. After the report was released the share price of the firm plunged and hit a low of $23.75 but recovered slightly to $26.85 and is currently 29 percent down from the IPO price of $38.00.
The report presented by Facebook was not all bad news and the company showed that it could beat expectations in both sales and monthly active user estimates. The good news was overshadowed by the massive increase in marketing and sales expenses by $392 million. Furthermore, a net loss of $157 million was reported by the social network.
Investors are also worried about continued competition from Twitter and Google. Facebook failed to show how it would keep its users engaged and not lose them to Google or Twitter. One of the company’s major issues has been its inability to translate users into sales. The latest numbers once again showed the social network may have gained on users but was unable to leverage that to make more money. Most users were coming from the mobile sector and Facebook has been struggling to convert this into sales.
Facebook CEO Mark Zuckerburg did address the mobile issue and stated that Facebook is very focused on mobile market for their business because it held a lot of promise. He did not elaborate further on exactly how the company would mine mobile users for further revenue.
