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Investors Are In Trouble With The Facebook’s Decelerating Revenue Growth

2018 has been quite tough for Facebook (NASDAQ: FB) investors. The biggest social media platform has suffered a lot due to scandals, data breaches, and increasing calls for oversight by governments across the world. Despite, to secure its users and platform, Facebook is taking essentials steps by spending a little amount of money, even in the face of slowing revenue growth.

Facebook will reveal its progress to its investors when the company disclosed its first-quarter results after the market closed on Wednesday, April 24. Let’s have a look on  Facebook’s final quarter results and review an ongoing investor offers to check whether they contain any insight into what investors can expect when Facebook reports its income.

Slowing Revenue Growth:

When Facebook disclosed its fourth-quarter report, investors take relief as its results were beyond their expectations. The organization reported revenue of $16.91 billion, which raised up to 30 percent year after year but eventually starts declining from the third quarter. Management had notified the investors to expect growth to be decreased by mid-to-high single digits. This denoted the fourth back to a back quarter of slowing growth, from the 50%, 42% and 33% year-over-year growth Facebook accomplished in the first three quarters of 2018.

Profit per share of $2.38 expanded to 65% year after year, however, profited by a one-time charge of $0.77 in the prior-year quarter. Adjusting for that charge brought profit that grew by 8%, the result of expenses that rises to 62% consecutively as Facebook keeps on making necessary investments to shield the platform and its users from bad actors and outside obstruction. Users’ growth continued with its moderate march upward, with monthly active users and daily active users each moving around 9%.

Recent Events:

From the past few years, investors are going through with the endless scandals which have affected this giant social media platform. Last week, in a proxy filing shareholder, gives a proposal to end Facebook dual-class stock system and replace it with one- vote- one- share regime.

The proposal commends that the current share structure will be ended over a period of time. The proposal was against the chairman and CEO Mark Zuckerberg’s uneven control that pushed shareholders towards a disadvantage which gives him more than half of the voting right though he owns only 13 percent of the economic value. The proposal said, “without voting rights, shareholder cannot hold the management accountable.”

The proposal also highlights that the stock had fallen more than 40% from July last year, but regained some ground and is down just 16 %. 

Note- With almost 60% of the voting power control, Zuckerberg will effectively vote against the proposal that tries to defeat him, so the investor proposition is purely symbolic.

Since the beginning of its challenges last year, it was important to secure the platform and Facebook has been continuously seeking different ways. The company expects its revenue growth to continue to reduce by a mid-single-digit rate, excluding the effect of foreign currency exchange rates. The management has said that revenue growth will keep on reducing throughout  2019.

As per the early records, investors will face inconvenience at Facebook, and the solution may take time to implement.  Investors should prepare themselves for more reduction in growth and expanded investments. We will get to know more once Facebook will disclose its earnings reports in the coming days. 

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