Facebook Stock Dips 16 Percent in Two Days on Outlook
The social network projects that its costs and expenses will increase substantially -- between 50 percent and 70 percent next year.Facebook's advertising businesses are doing very nicely, thank you, as indicated in its third quarter 2014 earnings report Oct. 28 that beat analysts' projection in all the important areas. Yet, as happens frequently on Wall Street, a successful company's stock took a header based on a cautious and not-exactly-optimistic outlook. The stock dropped a full 10 percent in after-hours trading Oct. 28 to $80.77; it dropped another 6 percent Oct. 29 to close at $75.86. With a market cap of $197 billion, a drop of 16 percent in two days is -- at least on paper -- a loss of a bit more than $31 billion in value. The giant social network projected that its costs and expenses will increase substantially -- between 50 percent and 70 percent next year -- because it is planning to invest in talent, is building a large addition to its home campus, and putting capital funds into new products, such as video, CFO David Wehner said on the company's conference call.
Facebook also sees Q4 revenue growing between 40 percent and 47 percent compared to the same period in 2013. That was a bit too conservative for Wall Street analysts, who were expecting year-over-year revenue growth of a solid 45 percent.