Facebook shares plunge 21 per cent, estimated $130 billion wiped out in market value

Facebook shares went into a freefall Wednesday as a stunningly weak financial outlook raised fresh concerns for the social networking giant as it tries to recover from the impact of data protection scandals and investigations, reports news agency Reuters.

After-hours trade saw Facebook shares plunge by some 21 per cent, wiping out an estimated $130 billion in market value if the slump is confirmed at Thursday's market opening, the report further said.

The second-quarter report sparked initial selling after it showed revenue and user growth came up short of expectations.

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Profit was up 31 per cent in the second quarter at $5.1 billion revenues rose 42 per cent to $13.2 billion, slightly below most forecasts.

Selling pressure accelerated when chief financial officer David Wehner warned in a call with analysts of a weaker outlook in the coming quarter.

Wehner said revenue growth "decelerated" in the second quarter and will decline "by high single digit percentages" and added that "we are also giving people who use our services more choices around data privacy which may have an impact on our revenue growth."

On the call, Jefferies & Co. analyst Brent Thill said that "many investors are having a hard time reconciling that deceleration... It just seems like the magnitude is beyond anything we've seen." 

Ross Gerber, an analyst at Gerber Kawasaki, said the latest figures suggest that the tide may be turning for Facebook and other social networks.

"Social Media has peaked," Gerber said on Twitter. "We told you last qtr and now we're seeing it."