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Facebook CEO Mark Zuckerberg may not like what he reads.
- Facebook lost almost $150 billion off its value on Wednesday after the company missed Wall Street's expectations on revenue growth and user numbers.
- Analysts lowered their price targets and said the worst is yet to come for Mark Zuckerberg's company.
- Follow Facebook's stock price in real-time here.
Facebook stock took an insane pummeling on Wednesday, wiping nearly $150 billion off of the company's value.
Disappointing second-quarter earnings and a far-from comforting management conference call were to blame for the dramatic share price tumble.
Facebook missed Wall Street expectations on revenue growth and user numbers. Revenue rose 42% to $13.23 billion but was $70 million short of forecasts. Monthly active users were around 20 million below predictions at 2.23 billion, despite being up 11% on Q2 in 2017.
For most other companies, this would be stellar growth, but Facebook operates in its own universe. And there was scant comfort on the earnings call, where analysts, investors, and journalists were told by CFO David Wehner that growth will continue to slow over the coming months.
Here's what Wall Street is saying about Facebook's earnings:
Baird
Price target: $195 (lowered from $210)
Analyst Colin Sebastian lowered Baird's price target after Facebook dropped "two bombshells" on the conference call: A "significant slowdown" revenue growth in Q3 and Q4, and operating margin declines. But the problems are "self-inflicted," Sebastian said.
Facebook is placing more emphasis on Stories, which don't yet make as much money as its news feed and other features. An increased focus on privacy and security could also be damaging profitability.
"While shares are moving to the 'penalty box,' we believe after-hours trading already embeds model changes. Maintain Outperform rating," Sebastian said.
Pivotal
Price target: $140 (lowered from $142)
Pivotal said the earnings were "OK" and did not materially impacted its modelling. But it warned that the GDPR privacy laws in Europe and other regulatory threats mean that more pain could be on the way.
"Our view is that the company is far from 'out of the woods' as 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," it said.
Macquarie Research
Price target: $190 (lowered from $220)
Analysts at Macquarie said Facebook's earnings reflect management making structural changes for the future.
"This should be welcomed, because in our view, the LT [long-term] trajectory is not on solid ground, as growing privacy issues, ramping gov't regulation, and ever-evolving user habits present LT existential threats to FB's health," they said.
As an interesting side note, Macquarie added that there has never been a better case for Facebook to introduce a subscription model.
"The potential for FB to offer consumers an ad-free subscription option is at the highest level ever. Beyond privacy, we are seeing consumers more and more comfortable paying for digital content," it said.
This story will be updated with more reaction as we get it.