Jul 26, 2018

Why Facebook's shellacking spells danger for all stocks

Illustration: Lazaro Gamio/Axios

Facebook lost more than $125 billion in value after the markets closed, with shares plummeting more than 20%, following an earnings report that missed revenue and user growth estimates.

Why it matters: Facebook is part of a small group of companies that has been keeping the overall stock markets afloat for much of 2018.

  • According to a Bank of America Merrill Lynch research note, the so-called FAANG stocks — Facebook, Amazon, Apple, Netflix and Alphabet (Google) —were single-handedly responsible for the S&P 500 being positive through the first half of 2018. Without them, the index’s first half performance would have been -0.73%.

What happened: Facebook spent the quarter trying to fix its fake news problem, and it’s possible that these results show (perversely) that it’s beginning to work.

  • Mark Zuckerberg wrote that “we're investing so much in security that it will significantly impact our profitability.”
  • Thing is, profits were actually up. And up more than expected. This is a top-line issue reflecting slowed growth, not a bottom line issue about more money going out the door.

Be smart: What we’ve seen in the past 12 hours is that these foundational stocks can fall very far, very fast, and very unexpectedly. Add in a recent subscriber growth hiccup from Netflix, which continues to trade at an astronomical multiple to earnings, and it shows just how thin the line has been between black and red.

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Coronavirus updates: Market ends worst week since financial crisis

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.

The stock market ended its worst week since the financial crisis, prompting the Fed to release a statement. Meanwhile, the WHO warned that countries are losing their chance to contain the novel coronavirus and raised its global risk assessment to "very high" Friday.

The big picture: COVID-19 has killed more than 2,860 people and infected more than 84,000 others in over 60 countries and territories outside the epicenter in mainland China. The number of new cases reported outside China now exceed those inside the country.

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California coronavirus: Latest case has no recent history of international travel

Gov. Gavin Newsom. Photo: Kevork Djansezian/Getty Images

A new case of the novel coronavirus in California was announced on Friday after Gov. Gavin Newsom said Thursday that 33 people had tested positive for the virus, noting the risk to the public remains low.

What's new: An adult woman with chronic health conditions in Santa Clara County who "did not recently travel overseas" or come into contact with anyone known to be ill was confirmed to have contracted the coronavirus on Friday by CDC and California Department of Public Health officials.

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Big video game conference delayed amid coronavirus concerns

Photo: GDC

Next month's Game Developers Conference in San Francisco became the latest tech event to be cancelled or postponed amid growing concerns over the spread of the novel coronavirus.

The big picture: A growing number of events are being scrapped, including Mobile World Congress and Facebook's F8 developer conference. Some, like the giant SXSW event in Austin, insist they are moving forward.