Facebook earnings: Millennials load up on stock ahead of earnings

Mark Zuckerberg, Facebook’s CEO and chairman.Reuters

• Facebook shares have been tumbling since the social-media giant reported second-quarter earnings on July 25 — but investors on the free-trading app Robinhood have been snapping up the stock.
• CFO David Wehner warned in July that the company expected a significant slowdown in its revenue growth in the years ahead.
• Facebook is set to report earnings after Tuesday’s closing bell.
• Watch Facebook trade live.

Facebook shares have plunged 35% since July 25 — when the company reported disappointing second-quarter results — but investors on Robinhood, a free trading platform popular among younger investors, appear to be betting on a turnaround following the tech giant’s third-quarter results, which are due after Tuesday’s closing bell.

According to weekly data tracked by Business Insider, a net of more than 60,000 Robinhood investors have added Facebook to their portfolio since the company reported its second-quarter earnings. There are now 175,541 investors holding Facebook shares on Robinhood’s platform, making the social media company the third most-popular stock on the app. It’s up nine spots since Facebook’s last quarterly report.

At the time, the company missed Wall Street’s expectations on revenue and both its number of daily and monthly active users. Following the results, CFO David Wehner warned investors that Facebook expected its revenue growth to slow from the 42% pace it posted in the second quarter and its operating margins to fall from 44%.

“Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019,” he said. “Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis.”

Wehner said that three factors are driving Facebook’s expected significant slowdown in revenue growth — currency headwinds, flagging revenues from its Stories feature, and the public’s increasing focus on privacy and security.

Now all eyes are on Facebook’s third-quarter earnings results.

Wall Street analysts surveyed by Bloomberg are expecting an adjusted profit of $1.85 per share on revenue of $13.8 billion. Their average price target is $203 — 30% above where shares were trading Monday.

Shares were down 20% this year.

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