Are Investors Worrying Unnecessarily about Facebook’s Strategy?

Image via Flickr Maria Elena

When the Q2 earnings report came out on Wednesday, Jul. 29, Facebook’s CFO, Dave Wehner, relayed that the company expects a moderate decline in their advertising revenue growth for the rest of 2015. The decline is part of an investment strategy, which Wehner believes shouldn’t affect stock prices. The quarter was a success for the company, even if the numbers show a slight decline. The overall growth rate has been declining for a period of time now. In part, this is due to the amount of revenue the company brings in every year. As the company continues to grow, the challenge in the marketplace is to find enough opportunity to beat their own benchmarks.

Q2 numbers indicate a 38.9% increase from last year’s earnings. To compare with other top earners – Google’s growth rate was only 11%, but Amazon’s growth rate came in it at 81%. The notable takeaway from Facebook’s public message of slow growth is that Wehner felt like investors and the public should understand the decline. The message indicates that the company does not foresee any significant pickup in revenue growth in the near future. Furthermore, nobody knows exactly how much of a slowdown to expect.

Facebook experienced a series of share gains and losses on Wednesday. The extremely high value dropped 2% after the earnings report was released, and then dropped once more when investors learned of a slow forecast for the remainder of the year. The company isn’t the only one to invest heavily during a short timeframe. Investors have also been concerned about other large companies who may be trying to do too much, too quickly.

Investor reactions to the news may be slightly overblown, however. User growth continued to increase over the past quarter, and there has been no indication that the platform will slow down in the near future. By the end of the day on Wednesday, shares for Facebook were up 2%, so maybe investors realized their reactions were slightly extreme.

Dave Wehner has held his position as Facebook’s CFO since June 2014. Prior to being promoted to the executive position, he served as the company’s vice president of corporate finance and business planning for 2 years.