Facebook’s (FB) second quarter was one to forget.
On Wednesday after the market close, the company reported revenue for the quarter that missed expectations while also showing user growth that had slowed with its monthly active users missing analysts’ estimates.
In the second quarter, Facebook earned $1.74 per share on revenue of $13.23 billion, while monthly active users totaled 2.23 billion. Wall Street forecast EPS to hit $1.72 per share on revenue of $13.3 billion with active users forecast to hit 2.25 billion.
And on its earnings conference call, Facebook said its revenue growth rates could slow by “high-single digits” in the third and fourth quarters, adding that expense growth was likely to outpace revenue growth next year.
On Thursday, shares of the company were trading down by as much as 19%, taking more than $100 billion off Facebook’s market cap while the drop in Facebook was also weighing on the broader market, notably the tech-heavy Nasdaq and the S&P 500.
Ahead of earnings on Wednesday, Facebook shares closed at a record high.
Following this stock crash, Wall Street analysts were mixed, with some seeing Facebook’s stock decline as an opportunity for investors to buy more shares of the company at a discount, while others took this quarter as a sign of trouble ahead of the social network.
Yahoo Finance reviewed reactions from more than a dozen Wall Street analysts on Thursday, and here are some of the highlights.
Stifel
“Facebook just materially reset expectations while blaming currency, GDPR, privacy, stories, and the kitchen sink,” said Scott Devitt and the team at Stifel.
“Mark Zuckerberg has been talking and writing about fixing the business for months now and yet management is just now discussing its impact to financial results. In fact, management had previously suggested there may not be a connection between Mr. Zuckerberg’s commentary and the advertising business. The company had every opportunity to begin to discuss these topics on the 1Q conference call but took a pass on it. It’s infuriating, to be honest. We are sticking with the stock on the sell-off because the damage is likely done and there is a good business here despite management.”
The firm maintained its Buy rating on Facebook stock despite its harsh assessment of management, though it did cut its price target to $202 from $242.
Raymond James
Aaron Kessler and his team at Raymond James downgraded shares of Facebook to Outperform from Strong Buy on Thursday, cutting their price target on shares to $210 from $240 in the process.
“Facebook reported modestly lower 2Q results and provided a softer 2H18 revenue outlook due to FX, promotion of the Stories format, GDPR, and privacy options,” the firm said in its note. “Additionally, Facebook guided mid/long-term operating margins to the mid-30s% vs. our ~45% in 2018. Given the increased near-term uncertainty on revenue growth, slowing user growth, and lower margin forecast, we are downgrading our rating from Strong Buy to Outperform and lowering our PT to $210.”