Facebook plunged 8 percent in early trading Thursday after reporting fourth-quarter results after Wednesday’s market session, wiping more than $50 billion off the social media giant’s market value. Facebook edged up in midday trading, down about 6 percent, its worst day since June 3, 2019, when it fell 7.51 percent.
Facebook reported a 51 percent increase in spending from 2018. Spending is primarily related to the company’s privacy and security improvements. At the same time, the company’s operating margin fell from 45% in 2018 to 34% in 2019.
In addition to spending more, Facebook warned of upcoming headwinds in advertising related to privacy and regulatory changes, which slowed growth in the U.S. Facebook said improvements in privacy rules for Apple’s iPhone and Google’s Android software could undermine its ability to target ads.
Pivotal Research Group on Thursday downgraded Facebook to hold from buy and cut its target price to $215 from $245.
“The slowdown in growth, particularly in the US, has far exceeded our expectations and is likely to continue,” Pivotal said. ”
These privacy-related spending and advertising resistance is expected to continue through 2020. Mark Zuckerberg, Facebook’s chief executive, said on the company’s earnings conference call Wednesday that privacy will be the company’s focus this year.
“It takes time,” Zuckerberg said. But over the next decade, I want us to build a reputation for privacy that will be as strong as the reputation we have built for good, stable service. “