Facebook Inc. (FB) has lost about $34 billion in market value since its May initial public offering, as the operator of the world’s largest social-networking service fails to assuage concerns about how it can make more money from almost a billion users.
Facebook’s stock dropped 12 percent today, its biggest one- day loss (FB) on record, after its first quarterly earnings report as a public company. That brought the plunge to 38 percent since the May 17 debut, which at $16 billion was the largest ever for a technology company. Chief Executive Officer Mark Zuckerberg’s fortune plunged to $12.1 billion today from $13.7 billion, according to the Bloomberg Billionaires Index.
“Investors were always paying for potential for Facebook,” said Aaron Kessler, an analyst at Raymond James & Associates in San Francisco, who has a market perform rating on the stock. “Clearly, today people are willing to pay less for that potential, which may be a few years out still.”
Of the largest IPOs on record, no other company has lost so much value so quickly, data compiled by Bloomberg show. General Motors Co. (GM) raised $18.1 billion after expanding its November 2010 offering and gained value in the comparable period, as did Visa Inc. (V) , which generated $19.7 billion when it listed in 2008.
The decline of $34 billion is more than many companies’ total market value, including Whole Foods Market Inc. and Time Warner Cable Inc. That’s based on a share count of 2.4 billion.
Expensive Valuation
While the stock decline has been steep, Facebook is still more than twice as expensive (FB) as rival Google Inc. (GOOG) and most of the Nasdaq Internet Index, as measured by price-to-earnings ratio. It’s grappling with shareholder concerns about slowing sales and user growth, and whether new revenue sources, including mobile, can boost results quickly.
Even with that drop in the stock price, the company remains more expensive than Web portal Yahoo! Inc. (YHOO) , video-rental services provider Netflix Inc. (NFLX) and online travel company Priceline.com Inc. It’s also more expensive than about 10 percent of the Standard & Poor’s 500 index.
Facebook’s debut as a public company was marred by technical glitches, and the stock managed to close above $38 only on the first day of trading. The company had first proposed a price range of $28 to $35 before raising it to $34 to $38 just days before the IPO.
In the second quarter, year-on-year advertising growth slowed to 28 percent, compared with 37 in the first quarter. The number of daily active users grew 4.9 percent from the first quarter, down from growth of 8.9 percent in the previous period, Facebook said in its earnings report.
Spending Surge
Sales in the second quarter increased 32 percent to $1.18 billion, topping the average estimate (FB) of $1.16 billion, according to data compiled by Bloomberg. Monthly active users rose to 955 million, exceeding the 950.1 million prediction by analysts surveyed by Bloomberg.
The revenue increase was dwarfed by a surge in spending on marketing and sales, which ballooned to $392 million. The company reported a net loss of $157 million, or 8 cents a share, and profit excluding certain costs of 12 cents a share.
The second-quarter operating margin, excluding certain costs, was 43 percent, a drop from 53 percent a year earlier. In addition, Facebook’s operating expenses are expected to rise “significantly” in the second half of the year, Chief Financial Officer David Ebersman said on the conference call.
The earnings report and call -- the most highly anticipated earnings release since Google’s inaugural figures in 2004 -- gave management its first chance since May to make a case to Wall Street about its growth prospects.
Twitter, Google
“A little bit of earnings guidance, a little bit of optimism about future performance would have been nice,” said Jordan Rohan, analyst at Stifel Nicolaus & Co. in New York, who has a hold rating (FB) on Facebook. “Facebook trades at a premium to many companies, including Google, and is only growing at a slightly faster pace than companies like Google.”
Shareholders sought assurances that the company can keep users engaged amid rising competition from Twitter Inc. and Google and that it can overcome challenges making money from advertising on mobile devices.
Facebook said in May that sales growth wasn’t keeping pace with user expansion as more people access the service with mobile phones. The number of ads delivered in the U.S. decreased 2 percent last quarter even as the number of daily users increased 10 percent, Ebersman said on the call.
Blogger Labels: Facebook,Stock,Plunge,Billion,Market,Value,operator,world,money,earnings,debut,technology,Chief,Executive,Officer,Mark,Zuckerberg,fortune,Bloomberg,Billionaires,Index,Aaron,Kessler,analyst,Raymond,James,Associates,Francisco,IPOs,data,General,Motors,November,period,Visa,Whole,Time,Warner,Cable,Expensive,Valuation,Google,GOOG,Nasdaq,Internet,ratio,shareholder,user,growth,results,portal,Yahoo,YHOO,rental,services,provider,Netflix,NFLX,Priceline,Standard,Poor,Surge,prediction,margin,addition,expenses,Financial,David,Ebersman,conference,figures,management,Wall,Street,prospects,Twitter,guidance,optimism,performance,Jordan,Rohan,Stifel,Nicolaus,York,Shareholders,competition,devices,expansion,users,Investors,Foods,sales,analysts,assurances,million,cents