Bombshell Wipes $120b Off Facebook’s Value

Facebook Inc Chief Executive Mark Zuckerberg’s fortune took a more than $15 billion hit on Thursday, as the social media company suffered the biggest one-day wipeout in US stock market history a day after executives forecast years of lower profit margins.

At least 16 brokerages cut their price targets on Facebook after Chief Financial Officer David Wehner startled an otherwise routine call with analysts by saying the company faced a multi-year squeeze on its business margins, Reuters reported.

That “bombshell”, as one analyst termed it, played into concerns on Wall Street that Facebook’s model could be under threat after a year dominated by efforts to head off concerns over privacy and its role in global news flow.

Shares closed down almost 19% at $176.26, wiping more than $120 billion off the company’s value or nearly four times the entire market capitalization of Twitter Inc.

Slowing revenue growth initially pulled the stock down nearly 9 in after-hours trading on Wednesday before losses picked up on the margin outlook.

“Over the next several years, we would anticipate that our operating margins will trend toward the mid-30s on a percentage basis,” Wehner said on a conference call with analysts. Facebook’s margin fell to 44% in the second quarter from 47% a year ago as it spent heavily on security and initiatives to convince users the company was protecting their privacy.

The company also said revenue growth from emerging markets and the company’s Instagram app, which has been less affected by privacy concerns, would not be enough to repair the damage. The impact on the rest of the FAANG group of high-flying tech stocks was marginal. Shares in Alphabet closed up 0.7%, while those in Apple Inc fell 0.3% and Netflix Inc closed barely higher. Amazon.com Inc was up 2.3% following its own results after the bell on Thursday.