Last week was a rocky week for Facebook and its millions of shareholders as the stock price fell by a whopping 20%. This happened after management announced its forecast of decelerated growth and increasing costs. Overall, the value of Facebook plunged by as much as $120 billion, much to the disappointment of investors and other interested third parties.
Although Facebook recorded a 42% year-over-year increase in revenues and a 32% increase in earnings per share, the quarterly results were very disappointing and the outlook for growth is not encouraging. First quarter revenues fell by 49% year-over-year when compared to last year’s first quarter, and second quarter revenues fell below analysts’ expectations of $13.4 billion, to reach only $13.2 billion. Added to that, management expects operating expenses to increase in the upcoming year, even while there is the dual expectation of slowing revenue growth. Expenses are expected to go up by as much as between 50% and 60% within the year, and operating margins are expected to fall to the mid 30’s, down from the current 44% operating margin.
At the close of trading on Friday July 27th, Facebook stocks traded at $174.89 per share, down 0.78% below the previous days close. During the last 52 weeks, Facebook stocks have traded for between $149.02 and $218.62 per share, and the one-year estimated price for this stock is $213.66 per share. Market capitalization currently stands at $506.242 billion, with trading volume of over 58.4 million shares. Average trading volume for Facebook shares is 21.4 million shares. The currently heightened trading volume demonstrates the high level of trading activity currently taking place as a result of the quarterly performance and the gloomy forecasts. Nevertheless, analysts recommend a “buy” for Facebook shares at this time.