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Facebook shares plunge 24% as user growth slows

Facebook shares slumped 24% in after-hours trading, as the social media giant revealed that its user base and second-quarter revenue grew slower than expected.
The shares, which have risen as much as 23% this year, fell to $201.40 in trading after the bell as the company warned that significant investment would hit profits into next year.
If such a share price fall was to be realised when trading opens on Thursday, it would mean more than $150bn (€114bn) would be wiped off the value of the social media firm - with founder Mark Zuckerberg seeing his personal wealth, on paper, plunge by $17bn.A decline of 24% in Facebook's value in regular trading would also represent the biggest one-day loss in value for a US company."The most popular stock among hedge funds got slammed last night and entered into a bear market territory," Naeem Aslam, chief market analyst at Think Markets, said."Even during the conference (call to investors), Mark Zuckerberg failed to rescue the stock as the element which haunted traders is that Facebook isn't confident about the growth rate."It was the company's first full quarter following the Cambridge Analytica privacy scandal.The firm said it had 2.23 billion monthly active users at the end of June, up 11% on June 2017, the slowest growth in more than two years.Analysts attributed the user growth shortfall largely to European privacy rules that went into effect in May.
The Cambridge Analytica scandal prompted several apologies from chief executive Mark Zuckerberg and generated calls for users to desert Facebook, which has grown strongly since launching as a public company in 2012.The company had warned investors to expect a surge in costs due to efforts needed to address concerns about Facebook's inadequate handling of users' privacy.Chief financial officer David Wehner said operating profit margin will sink to the "mid-30s" for more than 2 years.And quarterly revenue growth would be closer to 30% for the rest of the year, due to currency fluctuations and users choosing to have less personalised adverts as they opt out because of the European Union's General Data Protection Regulation (GDPR).Total expenses in the second quarter surged to $7.4bn (€5.6bn), up 50% from a year ago. However, ad sales seemed unaffected by the scandal, rising 42% in the quarter to $13bn (€9.9bn).Think Markets's Aslam said: "The other main reason for disappointment for Facebook investors was in the massive increase in the operating cost due to rise in the headcount. Smart money failed to factor in the impact of Facebook's scandals on user agreement which resulted in higher headcounts."
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Net income attributable to Facebook shareholders rose to $5.11bn, or $1.74 per share, in the second quarter ending 30 June, up from $3.89bn, or $1.32 per share, a year earlier.Total revenue for the quarter rose 42% to $13.23bn, below analysts' estimates of $13.36bn
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