It is fair to say many investors got cold feet and panicked since the data privacy scandal, dubbed the Cambridge Analytica Scandal, made the news on March 19. In an effort to minimize their loss, some investors sold shares in Facebook causing the stock to decrease in value by 14 per cent since that time. Many persons feared that the stock price would spiral downwards as usership would decline and tighter regulations would cost the company.
On the contrary, it did not. Facebook released its earnings report on Wednesday and it was better than predicted. Monthly active users in the first quarter increased by 13 per cent compared to the same period last year, totalling 2.2 billion users. Daily active users in the U.S and Canada, increased from 184 million users last quarter to 185 million users this quarter. Net income rose to USD$4.99 billion or USD$1.69 per share from USD$3.06 billion or USD$1.04 per share in 2017. Revenue was even better than expected, totalling US$11.97 billion from an estimated US$11.41 billion.
These are positive results for the world’s largest social network which has been surrounded by negative news for weeks about the role the company played in the recent elections, divulging personal information about its users. Facebook generates revenue by selling advertisements which is personalized to each user based on search history, age, gender, interests and friends list.
Coming from the scandal, Facebook could see increased regulations which may decrease ad profits as data used to target ads to users will have to be reduced. However, based on how the market responded on Wednesday, it is clear Facebook is in a good position to cope with regulations and the company will indeed get through this. The stock now trades on the NASDAQ at USD$159.69.
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