Facebook Shares Are Getting Sacked

Despite a strong earnings report, Facebook is sliding in pre-market trading.

The stock is down 7.7% to $US74.52 in early morning trading.

Facebook reported that it earned $US0.43 per share on $US3.2 billion in revenue for the third quarter of the year. That was ahead of analyst expectations for $US0.40 per share on $US3.12 billion in revenue.

The stock was fine on the earnings, but started to slide during the company’s earnings call.

On the call, new CFO David Wehner delivered two bits of unpleasant news.

First, he said revenue for Q4 would only be up 40%-47% compared the year prior. At the mid-point, that would be below analyst expectations. It’s also a steep deceleration in growth. This quarter, revenue was up 59%, and the quarter before revenue was up 60%.

Next, he said that expenses would increase by 55%-75% next year. The increase in expenses should hit Facebook’s profitability, but it’s part of Facebook’s plan to invest for the future. This shouldn’t be a surprise. But, it was a jolt to investors.

On the call, founder and CEO Mark Zuckerberg said he has a 3-year, a 5-year, and a 10-year plan for various business lines at Facebook. To execute on those plans, Facebook will need to invest.

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