Did Facebook Stock Drop Again on July 27
Facebook'southward Stock Plunge Shatters Religion in Tech Companies' Invincibility
Information technology had become an commodity of investor faith on Wall Street and in Silicon Valley: Quarter subsequently quarter, year later on year, the world'due south biggest technology companies would go on raking in new users and e'er-higher revenue. And with that, their share prices would continue to march upward, sloughing off whatsoever stumbles.
This week, that myth was shattered. And investors responded Thursday past hammering the stock of Facebook, i of the world's most valuable companies. Shares of the social media behemothic fell nineteen percent, wiping out roughly $120 billion of shareholder wealth, among the largest 1-24-hour interval destruction of market value that a company has ever suffered.
Investors dumped Facebook shares subsequently the company reported disappointing second-quarter earnings, in which the company warned of a sharp slowdown in sales growth in coming quarters along with rising spending on security and privacy enhancements.
The sudden drop likewise amounted to a exam of the giant, technology-focused stocks that have carried the market for much of the year.
Before Facebook's tumble, more than half the returns in the Standard & Poor'due south 500-stock index this year had been provided by just a handful of technology-related stocks, said Savita Subramanian, an disinterestedness strategist at Bank of America Merrill Lynch.
In recent years, investors — from private traders to the world's largest hedge funds — have snapped up shares in these companies, which include Facebook, Amazon, Apple and Google'southward parent company, Alphabet. These tech giants were viewed every bit having nearly unassailable revenue streams that could evangelize profit growth regardless of economical conditions.
Every bit a result, their share prices soared. This year alone Apple is up some 15 pct; Alphabet has gained more than xx percent; Amazon has surged more than than fifty percent; and Netflix is up nearly ninety pct.
Facebook's stumble suggests that some of these stocks — as well as the broader market place — could exist particularly vulnerable if their financial results don't live upwardly to investor expectations.
Until Thursday, Facebook was enjoying enormous gains. The stock was upwards more than 23 percent for the yr, earlier it reported earnings after Wednesday'due south shut. Past Th afternoon, all of its gains for the year had vanished.
It was the details of Facebook's study that seemed to spook investors. The visitor's quarterly revenue fell slightly brusque of meeting the expectations of Wall Street analysts. And executives warned that the company would invest heavily in privacy and security, and that revenue growth would most likely boring in coming quarters.
[Read more about the accumulation of issues Facebook said is starting to injure its multibillion-dollar business. ]
Still, Facebook's precipitous drop seems to accept had a limited effect on the broader market, which has shown signs of gaining traction in recent weeks as companies largely reported strong 2d-quarter earnings.
On Thursday, the S.&P. 500 was down just slightly, despite Facebook's tumble. Other large tech firms didn't take any cues from Facebook: Alphabet shares rose 0.eight percent and Apple slipped just 0.3 percent. Amazon fell 3 percent, just recovered those losses after hours on Thursday afterwards issuing a stiff quarterly earnings report.
The S. & P. 500 fell just 0.three per centum Thursday, to 2,837.44, while the Dow Jones industrial average rose 0.4 percentage to 25,527.07. The tech-heavy Nasdaq Composite index was the hardest hit by Facebook'south tumble, dropping 1 percent to 7,852.18.
The S. & P. 500 is up more than half dozen pct this year despite merchandise tensions surrounding the United States and its largest trading partners and the Federal Reserve's increases in interest rates. The alphabetize concluded Thursday only about 1 per centum below its high striking on January. 26.
"The market is looking ahead," said Jeffrey Rubin, manager of research at stock market information house Birinyi Associates. "At that place are e'er going to be these one-twenty-four hour period disasters."
It's quite possible that Facebook's shares could recover and continue to climb. In March, the company's handling of user data in the Cambridge Analytica scandal contributed to a backlash against the size and reach of the biggest tech businesses and raised concerns that regulators may soon crack downwards on these firms. Shares of Facebook fell 17 percent in the days subsequently news broke. By May, the company had erased those losses.
Still, the sheer size of Facebook's fall on Thursday became a focus for investors. The decline in Facebook's market value was roughly equivalent to the entire value of some of the country'southward best-known companies, including McDonald'due south, Nike and the industrial conglomerate 3M.
There are few examples of single-day losses and so large. In September 2000, every bit the tech stock nail turned to bust, the chip maker Intel warned that its sales could deadening, sending its stock price down by more than 20 percent. The rout knocked $91 billion off its market value in a day. Adjusted for inflation, that loss would be more than $130 billion in 2018 dollars, greater than the value Facebook lost on Th.
But given the vast market value of today's tech giants, and the fact that xx percent declines in share prices are non unheard-of, the size of the losses shouldn't be surprising.
Apple is now worth more than $950 billion. Amazon, Alphabet and Microsoft are not far backside, with market values of more than $800 billion. Fifty-fifty after the drib Th, Facebook is the fifth-largest publicly traded company, by market value, at more than $500 billion.
Source: https://www.nytimes.com/2018/07/26/business/facebook-stock-earnings-call.html
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