updated 10:11 am EDT, Fri July 27, 2012
Company failed to assuage concerns
Facebook's stock has taken a significant hit Friday in early trading, as investors dump shares and drive the price down by 15 percent. Within 45 minutes of Nasdaq's opening bell, shares are hovering around $22.50 as analysts negatively react to the company's first quarterly earnings report since the company went public in May.
The popular social network did not report dismal numbers for the second quarter, with revenues meeting or exceeding most Wall Street forecasts, however executives failed to provide guidance for the next quarter. Disclosing internal expectations is viewed as a demonstration of confidence and competence within a company's leadership.
Some analysts fear that Facebook's 32-percent revenue increases may be an indication that its once-stellar growth is beginning to wane. Speaking during a conference call following the Q2 disclosures, executives admitted that the number of ads served has grown much more slowly than the number of new users. The issue is said to be related to the shift toward usage via mobile devices, particularly in the US.
Founder and CEO Mark Zuckerberg noted that mobile is a "huge opportunity" for Facebook, though his comments mostly echoed statements already made early in the year as the company promoted itself ahead of the IPO.
Amid growth uncertainty and talk of overvaluation, Facebook shares have generally traded below the $38 IPO price throughout the past months. The company and its IPO underwriters currently face several lawsuits from angry investors who accuse the parties of deception and insider trading. The SEC and other regulators have reportedly opened separate investigations into the alleged wrongdoing.