Facebook posts loss in first quarterly earnings report, stock tanks

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Facebook stock drops over 20% overnightFacebook (NASDAQ:FB), which just went public this past May, released its first quarterly earnings statement after trading closed yesterday.  Despite almost exactly achieving its Earnings Per Share prediction, the stock still dropped 8.50% during trading Thursday in anticipation of the report, and continued to fall an additional 12% in post- and pre-market trading.  At the time of this writing, Facebook’s stock price had settled at a new all-time low of $23.68.

Since Facebook made history on May 18th of this year as the largest tech IPO ever, the social giant’s stock price has managed to fall a staggering 38% and while Facebook did meet analysts’ estimates for second quarter EPS, the reported 32% quarterly revenue increase to $1.18 billion was not enough to ease investors’ concerns over the company’s growing spending, as company expenses have swelled 295% to $1.93 billion since this time last year.

While Facebook does continue to grow its revenue, it is struggling to bring large advertisers to its platform and has stated that it will retarget its ad offerings to small and medium businesses instead.  Mark Zuckerberg, Facebook Inc founder and CEO, attributes lagging advertisement revenue to increase used of Facebook on mobile devices, as the mobile Facebook application does not currently incorporate a revenue-generating component as its browser-based sibling does.

Adding insult to injury, social gaming goliath Zynga (NASDAQ: ZNGA), which accounts for 12% of Facebook’s revenue, slashed its 2012 earnings outlook earlier this week from 23 to 29 cents share down to 4 to 9 cents a share.  The creator of popular Facebook games such as “Cityville” and “Farmville” has seen increased competition in the marketplace but is most likely also feeling the sting of users abandoning Facebook’s web-based games in favor of mobile gaming on their smartphones.

Facebook and Zynga stocks both plummet

Facebook and Zynga’s stock performances seem to have been intertwined since the Facebook IPO in May.

Zuckerberg said in the earnings release via the Wall Street Journal,  “Our goal is to help every person stay connected and every product they use be a great social experience. That’s why we’re so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends.”  Only time will tell if investors will continue to buy into Zuckerberg’s vision.

About the Author:

Phil is the President and founder of Denton Business Solutions. He's had a fascination with technology for as long as he can remember. Phil uses that fascination to guide manufacturers to technology solutions for enhancing their plant safety, cybersecurity, and productivity. Outside the office, Phil enjoys cooking, spending time with his wife and son, and reading up on the latest manufacturing news. You can connect with Phil on Facebook, Twitter, and LinkedIn!

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