Facebook Loses More Than $100 Billion In Value In Worst Stock Market Wipeout In History

Jul 26, 2018
Originally published on July 26, 2018 8:51 pm
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AILSA CHANG, HOST:

Today Facebook recorded the worst stock market wipeout in history. In just one day, Facebook lost more than a hundred billion dollars in value. Facebook is one of a handful of high-flying tech stocks that in recent years helped propel the U.S. market to new highs. Two other companies in this group, Apple and Amazon, are now vying to see which one becomes the world's first trillion-dollar company.

NPR business correspondent Alina Selyukh is here to walk us through all of what's going on. Hey, Alina.

ALINA SELYUKH, BYLINE: Hello.

CHANG: All right, so we just got Amazon's earnings. How close is Amazon to reaching a trillion dollars in market value?

SELYUKH: It's not there yet. As you pointed out, we're in earnings season. So Amazon's earnings just came out, and they are really good. Their profits more than doubled analyst expectations. Their retail and advertising business is doing well. They're also making a ton of money from their huge cloud services business. And they're racing against Apple, in a sense. Apple is still the most valuable company, Amazon a second. But Amazon did just surpass Google and is quickly closing in on Apple. Amazon CEO Jeff Bezos, whose fortune is tied to Amazon's stock value, he has been declared the richest person in modern history just earlier this year.

CHANG: Not shabby.

SELYUKH: So now Wall Street is waiting to see whether Apple or Amazon has their shares rise fast enough to get to that milestone, the first company valued at more than $1 trillion, which, you know, for context is more than the economy of Sweden or Saudi Arabia.

CHANG: Dang. All right, that narrative seems completely counter to the story of Facebook today. What is going on there?

SELYUKH: Well, Facebook released its earnings yesterday. They were really disappointing. These were the results covering the period of the Cambridge Analytica scandal, the following outcry to the data breach, also the new privacy rules that went into effect in Europe. And through all those months of apologies and outrage and intense hearings, Facebook actually managed to keep climbing in value.

But now it all finally caught up with the company. Facebook said it's now spending a lot of money on security. Its new advertising formats aren't working as well as they wanted. And, you know, advertising is key for Facebook. That's basically how Facebook makes money.

CHANG: Right.

SELYUKH: And of course for advertising, you need user data and lots of users. And then their big markets in Canada and in the U.S., they're not getting any more new users. It's pretty much flatlined. In Europe, they actually lost users, which may be a side effect to those new privacy rules. Facebook also made a pretty grim forecast for the rest of the year. They're saying essentially that they're not expecting to keep making money quite as well as they used to. So the shares closed down almost 19 percent. If you look at the price chart, it's just this straight line downward. So it's...

CHANG: Ouch.

SELYUKH: ..Pretty dramatic. It's a historic wipeout of more than a hundred billion dollars.

CHANG: OK, we mentioned Facebook, Amazon, Apple. Very quickly, what are some of the other big tech stocks you're watching?

SELYUKH: There's this group of tech giants that are publicly traded, have some of the most popular stocks. They're high-performance, high-growth prospects, very trendy. Wall Street likes to have short-term - shorthand terms. They've come up with this term called FAANG. It's Facebook, Apple, Amazon, Netflix and Google.

They're all powerhouses in their own worlds - you know, in social media, devices, advertising, online shopping, video streaming. And the five of them can together easily drive the market up and down. So those are the five really watched stocks. They are lately riding at all-time highs. They're most valuable they've ever been. And now the big question is, how much further can these companies really grow?

CHANG: That's NPR's Alina Selyukh. Thank you very much.

SELYUKH: Thank you.

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