The day after it reported disappointing earnings for the second quarter and its stock dramatically crashed, Facebook saw about $120 billion wiped from its market cap in trading on Thursday. That saw Facebook break a stock market record, but you’re probably not going to see Mark Zuckerberg updating his CV any time soon.
Until now, no company in the history of the U.S. stock market has ever seen $100 billion of its market value get vaporized in a single day. To find a comparable loss to Facebook’s today, you have to go all the way back to Sept. 22, 2000, when Intel’s market value lost a little more than $90 billion in a day.
Facebook’s market value had approached $630 billion as of the close of trading Wednesday. Then the company released its second quarter results after-hours, showing that Facebook had come in below analyst estimates on metrics like daily active users and showing a deceleration in revenue. And then boom, the bottom dropped out of the company’s shares today.
The company’s market value plummeted to a little more than $500 billion. Fun fact: Facebook’s loss of $150 billion after hours on Wednesday eclipsed the $124.3 billion GDP of Hungary.
Downgrades from analysts, naturally, started pouring in, like this one from Nomura’s Mark Kelley, who cut the stock from a “buy” to a “neutral” rating. “With stagnating core user growth,” he wrote in a note to clients, “we think there is too much near- to mid-term uncertainty to recommend shares at this point.”
The commentary in the wake of Facebook’s second quarter results has generally been pretty brutal, with most of the takes focused on reality setting in. About this being, you know, the moment core Facebook starts finally paying the piper, the byproduct of months of rolling scandals – Cambridge Analytica, Infowars, losing cool points to Instagram, you name it.
The way the Facebook bulls describe it, however, is that the company is doing this on purpose, and any near-term pain is — harumph — just a flesh wound.
You can see a bit of that in this commentary from BTIG’s Rich Greenfield (titled “Facebook’s Death Has Been Greatly Exaggerated). His thesis: Facebook is choosing to make less money for now, “deprioritizing near-term monetization to drive engagement.”
Among his reasons for optimism about the Empire of Zuck: Instagram, for one thing, will eventually be larger than core Facebook.
Also, Rich points out in a note, “Facebook bought back $3.2 billion of stock in Q2, their highest quarterly repurchase level in the history of the company … who buys back an all-time high amount of stock, just before giving out guidance that scares the daylights out of Wall Street, unless management has the utmost confidence in their long-term growth trajectory?”
Advertisers and brands, he goes on, are still seeing strong ROI from advertising across Facebook and Instagram. The Stories format is showing promise, and Facebook still has strong monetization potential across several areas, like IGTV — where it hasn’t even really started yet.
Rich winds down his note by urging investors to “Facebook and Chill.”
“We were pretty stressed out during Facebook’s Q2 2018 conference call and could sense the fear/panic in investors voices afterwards,” he writes. “But as we sat back and reflected on why we believe in Facebook, the core tenets of our investment thesis are unchanged as we highlighted above. Mobile is eating the world and Facebook is a core holding to benefit from that shift. Revenue growth may slow in the back half of 2018, but do not extrapolate too much from there. Much of what Facebook is doing in 2018 is to drive growth in 2019 and beyond.”
