Within just two hours, so Facebook market capitalization value has dropped by more than $120 billion. Well, one of the main reasons behind this turn down is the post by company which declared declining profits in the second quarter of 2018.
According to industry experts, Facebook’s investors felt insecure after the company posted declining profits in the second quarter of 2018.
Facebook, which is extensively known as the biggest social media platform worldwide with billions of users, witnessed another decline after the Cambridge Analytica scandal.
In March 2018 Facebook’s value dropped due to Cambridge Analytica scandal but reportedly it saw a 43% rise later on.
Well, according to analysts after witnessing the above-mentioned scenario which was actually worst for the company, now the investors and company itself doesn’t have to worry about any scandals and should feel positive of the company’s efficiency.
However, after seeing the earnings report for Q2 2018 which Facebook recently released, it seems that investors lost their trust in the company after the loss in profit was revealed.
On the other hand, another major reason behind the drop in value is the slow growth of users and no growth at all scenarios. Facebook obtains 70% of its ad revenue from the US and Europe. As, these are the markets where Facebook charges the maximum amounts for ads.
Surprisingly, the social media platform actually saw its monthly average users turn down in Europe from 377 million to 366 million users. Moreover, in the United States, the user count didn’t grow at all, staying at 241 million.
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A day before yesterday, Facebook’s shares fell down to $173.5 in after-hours trading, which shows a 20% drop. And this 20% drop in value, almost caused Facebook’s value to go down by $120 billion.
In view of the fact, this is the largest drop in the value of a public company. Since, the second position is claimed by Intel Inc., who went through a loss of $91 billion back in 2000.
Well, for now Facebook is not in a position to improve its revenues and profits over the next few years. As, the objective of Mark Zuckerberg is to regularly look up cybersecurity and digital privacy, and to avoid the negativities of life such as fake news, election manipulations etc.
David Wehner, Facebook’s Chief Financial Officer has mentioned that they suppose Facebook’s Operating Profit to Revenue ratio to drop down to the mid-30s range by 2019.
As currently, their Profit to Revenue ratio is 44%, which is a collapse from the ratio of 57% back in the last quarter of 2017.
“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,” Wehner said.
