Big hit for Facebook as latest results show cracks in growth

Facebook shares came under heavy selling pressure Thursday as the latest earnings report for the leading social network highlighted mushrooming costs in dealing with privacy, abuse and misinformation.

Shares plunged seven percent in opening trade to $207.57 as investors soured on Facebook even after a fourth quarter update largely in line with analyst estimates.

Profit rose seven percent from a year ago to $7.3 billion, while revenue increased 25 percent to $21 billion in the final three months of last year, the update showed.

The number of people using Facebook monthly climbed eight percent to 2.5 billion. For all its apps including Instagram, Messenger and WhatsApp, the figure was 2.89 billion.

Some analysts said the results pointed to weaker growth ahead for Facebook. "The specter of slowing growth took the edge off what has been an excellent run for the shares during 2019," said independent analyst Richard Windsor on his Radio Free Mobile blog.

"Despite the seemingly endless series of leaks and scandals, growth had remained strong, but some cracks are finally beginning to show."

Highlighting those concerns, Facebook acknowledged it agreed to pay a $550 million settlement in a class action suit based on allegations that users' biometric data was illegally gathered using photo-scanning technology and then stored.

The lawsuit stemmed from an Illinois law on biometric privacy, underscoring concerns on the costs of dealing with a range of data protection measures in Europe, California and elsewhere. Analyst Michael Levine of Pivotal Research Group downgraded Facebook after the earnings reporting, citing weaker-than-expected ad revenues and "headwinds" that could limit its ability to collect data for targeted ads, the largest source of revenue.

"More of the headwinds are ahead of us rather than behind us," Levine said in a research note. Investors appear concerned about the continuing increases in the amount of money Facebook spends as it pours resources into protecting privacy and preventing the network from being used as a platform for hate speech, abuse, and disinformation.