Facebook sees biggest stock market value drop in history as growth slows

Facebook lost more than $100 billion US in market value Thursday after the social media company posted earnings a day earlier that showed slowing growth.

The value was down by even more overnight after the company posted quarterly results late Wednesday showing its growth was grinding to a halt in Europe and North America, at a time when  increased privacy safeguards would raise its cost of business.

The company closed at $217.50 a share on the Nasdaq on Wednesday, but that was before earnings came out. Then came the plunge in after-hours trading, after the company revealed it had 2.23 billion monthly users in its last quarter, up 11 per cent from last year's level, but well short of what industry analysts had been expecting.

In North America, the daily user number was flat at 185 million, and in Europe it actually declined by three million people a day. All of this was enough to spook investors in the shares on the Nasdaq when the market opened on Thursday morning. Shares ended up finishing the day at $176.25 down almost 19 per cent on the day.

The previous one-day record was held by Intel, which lost $91 billion during the dot-com bust in September 2000.

At least 16 brokerages cut their price targets for the company after the company posted its results.

"With stagnating core user growth, we think there is too much near- to mid-term uncertainty to recommend shares at this point," Japanese investment bank Nomura said.

Before the earnings report, the bank had forecast Facebook shares would soon be worth $228 each. On Thursday, they downgraded that figure to $183, only slightly higher than where they are now.

Others are even more pessimistic. "Our view is that the company is far from out of the woods," Brian Wieser of Pivotal Research said. He was one of the few analysts to have a "sell" rating on the company even before Wednesday.

Specifically, Wieser says new European rules about company obligations to protect consumer privacy known as GDPR may prove to be expensive for the company in the long run.

"The bundling of consent for Facebook to use consumer data with access to the platform appears to be an aggressive interpretation of GDPR, and one that might be more subject to eventual regulatory action," Wieser said.

"While those actions might take time to play out, it is still possible that threatened fines associated with GDPR to Facebook or other sellers of advertising could also have the effect of spooking advertisers into changing how they use data," said Wieser, who thinks the shares should be worth $140 US — well below Thursday's level.