It’s been a bad week for tech on Wall Street. Just two days after Apple and Zynga both released disappointing results, Facebook shares have dropped, after it announced its first earnings report as a listed company – and the results weren’t good.
The social network reported a loss of $US157 million – in line with its guidance – compared to profit of $US240 million during the same period last year.
Shares promptly fell 11% to $US23.90, their lowest point since the company listed in late May.
But although Wall Street reacted negatively, chief executive Mark Zuckerberg defended the company while acknowledging the company’s challenge to continue offering more engaging advertising.
“These are the types of problems we like to work on,” he said.
Revenue growth has slowed to just 32%, reaching $US1.18 billion, with that figure at 45% in the previous corresponding period. This is what has investors worried – Facebook gets most of its money from advertising.
And although Facebook says it’s slowly dropping the proportion of revenue gained from advertising, it’s still a discouraging announcement for the market.
What’s even more disappointing is that the post-announcement conference call didn’t touch too much on the company’s specific plans, but rather broad strategic moves, which analysts suggest could put more downward pressure on shares.
After all, the company has lost a third of its value since trading in May – and the company has acknowledged that downward trend.
“We are disappointed in how the stock is trading,” chief financial officer David Ebersman said. “We are the same company now as we were before, and we have the same opportunity in front of us to build something important and valuable.”
Part of the disappointment has to do with the fact Facebook’s float was highly subscribed and anticipated. Many believe it was overvalued.
But there is some good news. The number of monthly active users has reached 955 million, up by 29% over the year, and mobile monthly active users were up 67% to 543 million.
Facebook has repeatedly said growth in mobile is where it will be able to tap into big opportunities for monetisation – much of the site’s daily activity occurs on mobile devices.
But none of this matters much to investors, apparently. Facebook shares listed at $US38 in May, and as of 12.00 AEST, were trading at just $US26.84.