Facebook's stock tumbles after 1st public quarter

Associated Press Modified: July 26, 2012 at 6:31 pm •  Published: July 26, 2012
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NEW YORK (AP) — Facebook's first earnings report as a public company had solid numbers, but in the end it landed with a thud — much like its rocky initial public offering two months ago.

Facebook reported stronger-than-expected revenue and a gain in user numbers Thursday. But investors weren't impressed and after a brief spike, its stock fell more than 10 percent, or $2.74, to $24.10 in after-hours trading. The decline means Facebook's stock will most likely open at its lowest level since going public.

It's another big disappointment for the Harvard-born company that was supposed to usher in the next Internet boom.

"They didn't break any banks," said Debra Aho Williamson, an analyst at research firm eMarketer. "They did not come out any better than anybody had expected."

What may have rattled investors is that Facebook's revenue growth has slowed. Between 2009 to 2010, the company's revenue nearly tripled. In the first quarter of this year, revenue climbed 44 percent. In the second quarter, Facebook Inc.'s revenue increased 32 percent to $1.18 billion from $895 million a year earlier. Analysts, on average had expected slightly lower revenue of $1.16 billion, according to FactSet.

For a freshly public company such as Facebook, the decelerating revenue growth is a concern. A bet on fast-growing revenue is the reason investors are willing to value new companies highly even if they are not making a profit. Another reason jittery investors may be even more nervous: Facebook didn't offer investors and financial analysts its outlook for the rest of the year.

Meanwhile, the number of people who access Facebook regularly inched closer to 1 billion. The company said it had 955 million active monthly users as of June 30, up 29 percent from a year earlier. At the end of the first quarter, it had 901 million users.

Overall the Menlo Park, Calif.-based company posted a loss of $157 million, or 8 cents per share in the April-June period, mainly due to compensation expenses it incurred when it paid $1.3 billion in restricted stock and related taxes for employees as part of the IPO. The loss compared with earnings of $240 million, or 11 cents per share, in the second quarter a year ago. The company's adjusted earnings of $295 million, or 12 cents per share, matched Wall Street's expectations.

The results come two months after Facebook's stock flopped on its first trading day, on May 18. The day began with glitches with the Nasdaq stock market that delayed trading by half an hour. It didn't get much better from there. Despite months of hoopla that had investors thinking it would soar, the stock closed just 23 cents above its $38 IPO price. It has not reached that level since.



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