Is this the beginning of the fall of Facebook? After announcing disappointing numbers for the second quarter on Wednesday, Facebook’s stock price plunged more than 20 percent in after-hours trading. If that decline holds on Thursday, it will be the biggest stock price drop in Facebook’s entire history. But the truth is that we will probably see the stock price bounce back a bit, because Wednesday’s crash was almost certainly an overreaction. Unlike many other tech companies, Facebook is still making lots of money, and the number of users globally is still growing. However, there are definitely some huge red flags. In the U.S. and Canada the number of users is stagnant, and in Europe the number of users is actually declining. Facebook’s user base is aging as many young people abandon the platform for trendier alternatives, and there is a growing backlash among conservatives against the tremendous censorship that we have seen in recent months. People are hungry for an alternative, and if something more appealing comes along Facebook could ultimately suffer the same fate as MySpace very rapidly.
Stock prices tend to fall a lot faster than they go up, but what happened to Facebook on Wednesday was truly breathtaking…
Facebook lost about $130 billion in market value in just two hours, its steepest stock decline ever, after warning of slowing sales growth.
The stock, which plunged as much as 24% in after-hours trading Wednesday, had a cascading effect on competitors Snap and Twitter, which dropped, too. Traders are bracing for a decline in tech stocks when the markets open Thursday.
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