Facebook Falls Most in 9 Months
Facebook shares slumped the most in nine months after executives suggested the company probably won’t be able to keep up with its explosive pace of growth much longer, according to Bloomberg. The stock dropped as much as 5.5 percent Thursday morning after two sobering comments on its conference call the night before.
First, Chief Financial Officer David Wehner said revenue growth rates will come down “meaningfully” next year, because the company won’t keep increasing the percentage of ads that Facebook users see in their news feed. Second, capital expenditures will rise “substantially” in 2017. as the social network works to build data centers and recruit the best engineers, he said. “As we slow ad load growth, we’re going to have a slowing of revenue as well,” Wehner said. “it’s been one of the key factors in terms of driving growth.”
Facebook reported third-quarter sales grew 56 percent to $7.01 billion, topping analysts’ average estimate of $6.92 billion. It was the fourth straight quarter of more than 50 percent revenue growth. Facebook generated 84 percent of its advertising sales from mobile phones, unchanged from the prior quarter.Advertising provides more than 97 percent of the social network’s revenue.
Facebook will begin limiting its ad load, the number of ads it allows per the number of news feed stories, to keep from turning away users, who come to the site to see updates from their friends and family, not ads, Wehner said on the call. The comments help push shares down as much as 5.5 percent, the most since February, to $120.12 in New York. Facebook’s stock had gained 22 percent this year through Wednesday.
In the third quarter, Facebook increased its monthly active users 4.7 percent from the previous quarter to 1.79 billion, topping analysts’ estimates of 1.76 billion. Daily users rose to 1.18 billion. Facebook expanded its mobile ads business to Instagram which has started to contribute to the growth. While the company doesn’t break out sales, Instagram’s advertising revenue is rising faster than for Facebook’s main product. Still, Facebook’s main app was the bigger contributor to the sales increase.