Facebook suffers biggest one-day rout ever as shares tumble 19% – as it happened
Investors desert Facebook after it missed revenue targets as the cost of the Cambridge Analytica scandal bites
- Latest: Facebook shares tumble almost 20%
- Up to $125bn wiped off company's value
- How Facebook disappointed Wall Street
- Operating margins to shrink as costs spike
Earlier:
9.41pm BST
Amazon's sparkling-looking results also includes a flurry of new achievements and milestones, from new Fire smart TVs and tablets to a French Alexa, Amazon Prime's 22 Emmy nominations and some new cloud computing kit.
But analysts really care about the guidance -- which shows that Amazon expects sales and profits to keep surging.
9.18pm BST
It's another big earnings night.
Amazon has just posted a record quarter, with revenues up 39% to $52.9bn. That's a huge sales performance, but actually $500m less than expected.
#Amazon second-quarter revenue +39% with e-commerce and #AWS robust. Net sales $52.89 bln vs $37.96 bln @ Q2 2017
Net income $2.53 bln, or $5.07 per share vs. $2.50/shr avg. Wall St view; $0.40c/shr Q217. Overall strong beat ^KO
Amazon up 4 percent, after an initial drop following earnings https://t.co/6QnZVV4qZZ pic.twitter.com/HYspaejfkk
Amazon figures look amazing- net sales up 39% in a business 23 years old. But then I've not read what analysts expected.... https://t.co/R06nvROX4l
9.09pm BST
Boom! It's official, Facebook has suffered the biggest loss of stock market value in a single day, ever.
Shares in the social media giant just closed down almost 19%. That leaves them at $176.26, down $41.24 in a single painful session.
Today's Facebook move is on track to be the largest 1 day market cap loss in history. Here are the others. https://t.co/kWp5223y8p pic.twitter.com/UhMmM6tMLt
7.34pm BST
There's no relief for Facebook shares, which are now down 19.5% - wiping around $120bn off the company's value.
Still, for every seller there's a buyer. So some investors think this is a good opportunity to snaffle a stake in Facebook.
First, the bad news. The market seems to be questioning the quality of growth seen in the past as Facebook spends more to address many of the concerns surrounding abuses on its platform and makes changes on the back of the GDPR regulations in Europe. This has had a negative effect on both costs and revenue growth and caused the market to question Facebook's long-term prospects and the quality of its past performance.
"That said, I think the market is missing the larger picture here. First, even with the lowered guidance, revenue is still most likely to grow in the mid to high 30% range going forward. The guide higher in expenses (and lower in margins) reflects an increase in predominantly fixed costs that will scale nicely as revenue continues to grow, so margins-even though they will be lower over the next several years as these expenses ramp-should not be permanently impaired. Ultimately these expenses will improve earnings quality and the sustainability of the business model. We believe that it is more likely than not that Facebook's earnings will double over the next 5 years and provide a very satisfactory return for long term investors."
6.16pm BST
Facebook is still on track to set an unwanted record tonight:
Facebook could become the first company in world history to lose $100 billion in market cap. in a single day. pic.twitter.com/uiMjIxcgiG
5.59pm BST
After a very bruising morning, Facebook shares are still down over 18% in New York.
This has pulled the Nasdaq index into the red too; it's down around 1%, having hit record highs earlier this week.
5.26pm BST
There's still a case for investing in Facebook, despite its setbacks and the challenges ahead.
Ben Barringer, equity research analyst at Quilter Cheviot, explains:
"Facebook is making the changes to ensure that its place as the leading social media network is maintained following considerable scrutiny in the press and on Capitol Hill. Facebook's user base remains large with over 2bn monthly active users and over 1.4bn daily active users. Ahead of the mid-term elections it is vital that it takes action on fake news, any political advertising on Facebook and of course data security. This involves considerable investment in staff and artificial intelligence and these costs will grow faster than revenue for the next 2 to 3 years.
"However for advertisers, the size and targeting offered by Facebook and increasingly Instagram, is highly attractive and this will continue to drive the growth of revenues and profits."
4.08pm BST
Facebook founder Mark Zuckerberg has suffered a staggering hit today.
The value of Zuckerberg's stake in Facebook has fallen by around $15bn today, or 11bn.
3.27pm BST
This chart from Bloomberg shows how Facebook is facing the biggest loss of market value in cash terms ever:
3.10pm BST
Wall Street analysts are worried that Facebook suffered a slowdown in user growth last quarter.
The number of North American daily active users on the site remained flat, while the European user base actually shrank -- following the Cambridge Analytics scandal, and new data protection rules.
3.04pm BST
Bloomberg point out that several Facebook executives have been selling shares in recent months. A canny move, given today's rout....
Facebook insiders have sold $4 billion in shares since the Cambridge Analytica scandal broke. Most of it came from Mark Zuckerberg https://t.co/QlxQM9Lysz pic.twitter.com/F1xok48iQs
2.59pm BST
As you can see, Facebook missed several forecasts last night (although earnings per share were better than estimated)
2.56pm BST
Facebook shareholders are suffering a historic loss of value today:
Facebook shares down nearly 20% on opening. Company value down more than $100bn. Biggest one-day hit in corporate history@SkyNews
2.52pm BST
Colin J Sebastian, analyst at Baird, says Facebook's share price has been struck by two self-inflicted blows.
Facebook dropped two "bombshells" on the Q2 earnings call, a significant slowdown in revenue growth for Q3/Q4, followed by operating margin declines over the next 3+ years.
Importantly, these are "self-inflicted" issues to a large degree, as Facebook sacrifices core app monetization to drive usage/engagement of Stories.
2.47pm BST
At one stage, Facebook's shares were down a hefty 20% - wiping around $125bn off its value.
That's basically the value of fast food chain McDonalds .
Facebook stock just fell as much as 20% at the NASDAQ open, wiping off more than $120 billion in value pic.twitter.com/wC4U7mkimR
"If you look at their forecast for the second half of the year in terms of user growth, and the expense profile, it refuels the fundamental worries about Facebook post-Cambridge Analytica."
2.38pm BST
Facebook is tumbling in early trading on Wall Street, after the social network giant revealed the true cost of its data scandal last night.
Shares in Facebook have plunged by 18% - an astonishing fall for a company of this size.
"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."
"Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019,"
2.28pm BST
Facebook shares have been hammered in pre-market trading....as traders prepare for the open of Wall Street....
2.13pm BST
Chris Beauchamp, chief market analyst at IG Group, argues that investors shouldn't totally lose faith in Facebook, despite yesterday's disappointment.
He writes:
"Perhaps the data scandal is at last beginning to bite in Facebook's earnings. Certainly, the frequent references to the other platforms available such as Instagram and the new revenue metric of how many people use at least one of the FB apps each month send a message that this is a company looking to find ways of becoming more than just a social media platform.
High expectations can be a remarkable burden, and the reaction is often brutal when they are missed, but the revenue miss was slight, and $13.2 billion is not to be sniffed at. Facebook might have its wings clipped, but it is still a remarkable money-making machine.
1.40pm BST
Fortune's David Meyer has a pithy explanation for how Facebook's latest results disappointed Wall Street last night:
The company announced revenues and daily active user numbers that fell short of analyst estimates ($13.04 billion vs. $13.32 billion for the quarter, and 1.47 billion rather than 1.48 billion) and, more worryingly for investors, it warned that its increasing privacy efforts would hit its growth rate further in the second half of this year.
Indeed, user numbers in North America are flat and those in Europe have actually fallen. So the expectation that Facebook was just going to shrug off Europe's hard-hitting new General Data Protection Regulation (GDPR), as well as the privacy scandals that have plagued it through much of the year so far, was way off the mark. These things are making a difference, and they will continue to do so.
Why Facebooks's stock market pain is necessary-and will continue https://t.co/xcF6j8RE2k
1.02pm BST
Facebook's stock market woes could go down in stock market history, says CNBC's Michael Santoli.
Will it become known as Facebook Thursday?
"Marlboro Friday refers to April 2, 1993, when Philip Morris announced a 20% price cut to their Marlboro cigarettes to fight back against generic competitors...As a result, Philip Morris's stock fell 26%." pic.twitter.com/bdtLGGo1wa
12.54pm BST
Newsflash: The European Central Bank has left eurozone interest rates unchanged, at its meeting today.
That means the headline borrowing rate remains at zero, an all-time low. Banks still face a negative interest rate (-0.4%) for leaving cash at the ECB's vaults rather than lending it.
12.47pm BST
Market analyst David Jones points out that Facebook's shares hit record highs yesterday, before the company gave Wall Street a nasty shock after trading ended.
All eyes on facebook $FB at the open. Hit fresh all-time highs yesterday - the 20% dump in after hours doesn't change the big trend. Yet: pic.twitter.com/xe1RisprSG
12.36pm BST
Facebook shares remain on track for a massive slide when trading begins in New York, in less than two hours time.
The stock is down around 20% in pre-market trading, after it missed Wall Street expectations last night and warned that profit margins will be thinner than expected in the years ahead.
If pre-market is correct $FB on course to lose all of its YTD gains when market opens later.#Faceplant
#FAANG is in trouble today. #Facebook growth is slowing. It missed analyst expectations for revenue. Shares dropped 20% post-market. If the sell-off holds when the market opens, it will be one of the largest declines in value ever suffered by a U.S.-traded company in a day.
12.21pm BST
The French government has weighed in, seeking 'clarification' on the agreement reached between Juncker and Trump yesterday.
Finance minister Bruno Le Maire sounds concerned that France's farmers could suffer, declaring firmly that agriculture should "be kept outside the scope of the discussions" on lowering trade barriers.
"We have high sanitary, food and environmental standards as well as rules of production to which we are attached and that guarantee the protection and safety of our consumers.
Europe will not compromise on these norms."
France calls for 'clarifications' on US-EU trade talks https://t.co/gDbu95ewox
11.15am BST
Writing in the New Statesman, Stephen Bush argues that Jean-Claude Juncker outplayed Donald Trump yesterday:
In reality, it's a remarkable coup for Juncker. The EU is already seeking to buy more gas as part of the Commission's long-term efforts to wean the continent off Russian energy.
The EU already has zero tariffs on soy in place, and American soybeans are currently at a low price thanks to Trump's trade war with China making them attractive to European farmers anyway.
One reason why Trump's White House is so erratic is that the president's mind changes depending on which advisor is currently in favour: those wanting to avoid a trade war are currently on the up, but that could change.
And that Juncker has conceded very little that the EU hasn't already conceded in practice may mean that Trump decides he's been had and that the whole mess is re-opened in the not too distant future.
10.58am BST
Britain's Department for International Trade is hoping that America will soon lift its tariffs on EU steel and aluminium.
In a statement, it says:
"We welcome the agreement by the U.S. and the EU to work together to reduce barriers to trade and to further increase trade and investment,"
"We look forward to progress towards the removal of steel and aluminium tariffs and de-escalation of the tit-for-tat action that could harm businesses and jobs on both sides of the Atlantic."
10.26am BST
Overnight, China has escalated its trade dispute with America by thwarting a $44bn takeover deal.
Qualcomm won't buy NXP. This is a direct result of the trade war Trump started. Although China denies this. Remarkable. https://t.co/x5lAzAxzfw
"We didn't see anything in the near-term that would make it worthwhile to change the timing. There were probably bigger forces at play here than just us."
9.59am BST
The Frankfurt stock market is leading the charge this morning, as trade war relief ripples through the trading floors.
The German DAX has jumped by 1.4% this morning, or 172 points, to 12,751 . Automakers are continuing to rally, thanks to Trump's pledge not to impose tariffs on car imports (in the near future, anyway).
German carmakers gain as Trump relents on car tariffs. #Germany's Dax index among top performers in Europe today. pic.twitter.com/XouYPhGSkI
While there isn't exactly much substance to what was announced, with the fact the relationship didn't worsen being more notable than the plans to negotiate, it was enough to lift the spirits of the previously fearful markets.
9.17am BST
Alan Beattie of the Financial Times makes some good points about the EU-US trade announcement in this thread:
A few morning-after thoughts on last night's EU-US trade announcement. First up: bold move from the Commission. A big surprise to many including members of Congress and EU member states (and, rather less importantly, me). 1/n https://t.co/dm7NqhcoUf
Some of the deal can easily be achieved as they are meaningless - the soybean and LNG parts, which the EU is already doing. If Trump continues to believe these are concessions he is v gullible indeed, and hats off to the Commission for fooling him. Let's no-one tell him, eh. 2/n
Some bits are clearly impossible & will have to be quietly forgotten to make deal work eg ending all non-tariff barriers & non-auto industrial subsidies. This wd mean wholesale dismantling of EU regulation. Zero subsidies also means no cash for Airbus or Boeing. Non-starter. 3/n
The doable bit that is actually new would be cutting all non-auto industrial tariffs to nil. This had basically already been agreed in TTIP. It's not earth-shattering as they are already low, but it's substantive. 4/n
However the deal also means the EU breaking own pledges and principles: 1. apparently starting talks despite steel/aluminium tariffs still in place. 2. ignoring its new rule of only agreeing FTAs with signatories to Paris Agreement on climate. 5/n
3. (slightly more arguably) signing a deal excluding agriculture and cars contravenes the spirit if not the letter of the WTO rule requiring FTAs to cover "substantially all trade". All hypocritical, but maybe EU considers them necessary hypocrisies. It's good at those. 6/n
Overall it's a deal to avert a trade war, not significantly to advance liberalisation. I'm sceptical it will stick, not least because Trump's agreements on trade have a habit of unravelling rapidly and it's essentially based on conning him. But I've been wrong before. 7/7
9.05am BST
Paul Donovan of UBS isn't convinced by Juncker's pledge to buy more American soybeans....
US President Trump tweeted that EU officials were going to buy more US soybeans. EU officials cannot do that. The US is already the largest exporter of soybeans to the EU. There are no subsidies, trade taxes or quotas on soybeans in the EU.
Private farmers decide whether to buy more soybeans or not.
8.50am BST
Not everyone is cheering the news that America and Europe will co-operate on trade.
Others noted that while the announcement marks a change in tone, it won't necessarily stop Trump from moving forward with auto tariffs later this year if he changes his mind.
"it doesn't seem to solve any of the problems the president flagged - trade deficits, tariffs, subsidies."
"It looks a lot like deals struck with China last year, which of course were a prelude to a full-blown trade war.
Today's trade detente between the US and EU is being widely welcomed, but it has its limits. In the words of @philipilevy: "It looks a lot like deals struck with China last year, which of course were a prelude to a full-blown trade war."
Our take: https://t.co/gyC2PYcSWs
8.34am BST
Shares in European car makers are jumping sharply, as the threat of punitive tariffs fades away.
Porsche, BMW, Fiat Chrysler and Volkswagen have all surged by at least 4% in early trading.
Traders do have every right to celebrate Juncker and Trump meeting because the tensions were high before the meeting as it was pretty much clear that we are heading towards a real trade war. But thanks to common sense which prevailed last night, and it eased tensions stoked by threats coming from both side.
Under the agreement, both sides would hold off on other tariffs as the negotiation process continues. The joint statement by leaders did look like a fairy tale, both sides agreed to work towards zero tariffs. For Trump it does not matter what the final deal would like, but for now, it is enough for him to show the world that he delivered on his promise and he brought the Europeans to a point where he thinks that things are fair.
8.23am BST
European officials were pleasantly surprised by Donald Trump's attitude last night, reports the Financial Times:
"I think it was another Trump we saw in there," said one senior EU official. "He was different from the tweets and the noise, different from all that brouhaha. He was focused and engaged and clearly looking for something to help with the markets."
Another person familiar with the discussions said Mr Trump was eager to find a solution to what had become a growing problem for both sides. "Anyone who knows Donald Trump knows that he wants to make deals," said the person.
8.13am BST
European stock market have opened higher, as traders welcome the warming of relations between Washington and Brussels over trade.
A tale of two faceoffs. US equity futures in the red following Facebook earnings miss. European equities starting strong as EU-US trade war tensions ease. Money flowing back to Europe good for $EUR bulls pic.twitter.com/E4wX8pNRs2
8.05am BST
The Trump-Juncker agreement isn't really a deal, but it could turn into a game changer.
So says Holger Schmieding of Berenberg Bank, who is reassured that America won't impose tariffs on EU car imports while negotiations continue.
The US-EU agreement to talk rather than to slug it out in a tit-for-tat escalation of trade barriers strengthens our base case: despite all the noise, the US will not levy new tariffs on car imports from the EU in the end. Instead, the trade tensions stoked by Trump will ease somewhat as the two sides either strike a deal fast (25%probability) or at least engage in serious negotiations (55% probability). If so, Eurozone business confidence can recover this autumn.
This should allow the Eurozone to overcome its current soft patch with a return to annualised growth rates of around 2% from Q4 2018 onwards.
7.53am BST
The IMF's managing director, Christine Lagarde, has welcomed Trump and Juncker's agreement:
"I am pleased to learn that the United States and European Union reached agreement today to work jointly to reduce trade barriers and, together with other partners, strengthen the WTO.
The global economy can only benefit when countries engage constructively to resolve trade and investment disagreements without resort to exceptional measures."
7.46am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Related: US and EU reach deal to calm trade war fears - as it happened
Obviously the European Union, as represented by @JunckerEU and the United States, as represented by yours truly, love each other! pic.twitter.com/42ImacgCN0
Great to be back on track with the European Union. This was a big day for free and fair trade!
European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!
Congrats to @JunckerEU, @realDonaldTrump: Breakthrough achieved that can avoid trade war & save millions of jobs! Great for global economy!
This is more positive outcome than many had expected.
Related: Facebook stocks plummet more than 20% amid concerns over growth
Facebook's $151 billion rout could rewrite history as the biggest stock-market wipeout in the U.S. https://t.co/8o4EZrnmDL pic.twitter.com/dK6SQBb3VJ
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