Shares of Facebook Inc. (FB, Financial), a social network company, have plummeted in 2018, and through the end of the year, I do not expect much from the social media giant. The owner of Instagram and WhatsApp, along with several smaller companies, Facebook’s stock is down over 22% between Jan. 2 and Dec. 3.
Facebook hit its highest price of the year on July 25 when it rose to $217.50 per share, just shy of its 52-week high of $218.62 a share.
The social media giant has been able to mask a lot of its problems thanks to its massive userbase, but its flaws are starting to show. Privacy and security remain a major issue for its 2.2 billion monthly active users.
A Belgian court ordered the company to stop tracking people and collecting private information through third-party sites. In March, the company announced an apology tour and policy changes after data harvesting allegations turned out to be true. Even worse, the company knew of the data theft and did nothing to stop it.
Revenue remained strong for the company despite these concerns, rising 33% in the third quarter compared to the same period a year earlier.
Facebook's advertisement platform remains strong, reeling in new companies and leading digital marketing companies in Toronto and other major business hubs around the world.
Strong revenue and earnings did little to boost the company’s stock price, and its base growth has slowed. Second quarter user growth in the U.S. and Canada remained flat, and just 22 million users were added worldwide during the quarter. This marks the lowest user growth since 2011.
Revenue, while still remaining strong, has failed to grow as quickly as it had in the past. Following the release of the company’s second-quarter earnings, the company lost $150 billion in value.
Facebook has forecasted lower revenue growth in the coming quarters, as privacy regulations have caused the company to invest heavily in security. Conservative forecasts for the rest of the year are likely to keep Facebook’s stock subdued into the 2019 trading year.
CEO Mark Zuckerberg has stated that he has been working on “fixing” Facebook’s business for months. Management’s talk of the financial impact of this “fix” is affecting investor sentiment.
If Facebook had discussed the financial impact during the first-quarter call with investors, we may have seen the stock rise to end the year.
Disclosure: The author does not own any stake in the listed equities.
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