Facebook's Stock Drops 6% Despite $20 Billion in Q4 Sales

The social network is growing — but not as fast as it did in previous years

Facebook’s stock price took a hit on Wednesday afternoon, despite narrowly topping Wall Street’s fourth quarter revenue and earnings estimates.

The social network reported Q4 earnings per share of $2.56, a hair above analyst projections of $2.53 EPS. Facebook also brought in $21.08 in quarterly revenue, coming in about $200 million above expectations; the company’s Q4 revenue marked a 25% increase year-over-year. At the same time, Facebook’s daily active users climbed to 1.66 billion, up 9% year-over-year, and its monthly user base hit 2.5 billion after entering the quarter at 2.45 billion.

But those gains weren’t enough to satiate investors, it appears.

Facebook’s stock dropped about 6% in early after-hours trading on Wednesday, hitting $210.60 per share. Heading into Wednesday afternoon, Facebook was trading at a new all-time high of about $223 per share.

One reason Wall Street could be disappointed in Facebook’s performance is that even though it’s still growing at a fast rate, it’s not growing as fast as it once did. For instance, for all of 2019, Facebook brought in nearly $70 billion in revenue, up 27% year-over-year. But that compares to the year before, when Facebook’s annual revenue increased 38% from the prior year; the year before that, in 2017, its revenue increased 47% year-over-year.

“We had a good quarter and a strong end to the year as our community and business continue to grow,” Facebook chief Mark Zuckerberg said in a statement. “We remain focused on building services that help people stay connected to those they care about.”

Facebook, in its letter to shareholders, said 2.89 billion people each month use one of its apps, which includes WhatsApp and Instagram. Even with an increased focus on running ads on Instagram, Facebook did not mention how much the popular pictures-and-messaging app contributed towards its Q4 ad sales.

After running into some growth issues at home about 18 months ago, Facebook has since returned to adding daily users in the U.S. and Canada at a slow pace, with the company going from 189 million to 190 million DAUs domestically since Q3. The company’s fastest growing region is its “Rest of World” market, which includes Africa and Latin America. This market increased 2.5% from the previous quarter, finishing 2019 with 532 million DAUs.

Facebook was heavily criticized, both in Hollywood and Washington, D.C.,  as 2019 came to a close over its decision to continue not fact-checking its political ads. Sen. Elizabeth Warren ripped the company and Zuckerberg several times, and comedian Sacha Baron Cohen skewered Facebook for allowing “bigotry and misinformation to thrive.”In recent weeks, Nancy Pelosi and Joe Biden have also joined in on the chorus of politicians railing against Facebook.

Zuckerberg and the company, on multiple occasions, have said Facebook would not change its political ad policy, despite the criticism. During a speech in October at Georgetown University, Zuckerberg said he believed “in a democracy it’s really important that people can see for themselves what politicians are saying, so they can make their own judgments.” He later dded he doesn’t think “a private company should be censoring politicians or news.” Overall, political ads will represent less than 1% of Facebook’s ad revenue this year, Zuckerberg said.

Facebook will hold a call at 2:00 p.m. PT to discuss its earnings.

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