Facebook has lived a charmed life on Shameless sex scenes compilation from season 6Wall Street ever since its disastrous first day as a public company.
The social network has only missed earnings expectations once, and its stock chart forms a very pleasing up-and-to-the-right increase.
Facebook's stock is up more than 230% since May 2012. That success has made it into a powerhouse — as well as a company that may begin finding it difficult to further impress investors.
Facebook's Wall Street fairy tale is ending thanks to its own success and continued lofty expectations.
The chart above is about as good as it gets for a company in its first few years in the public markets. Facebook's charmed life looked set to continue on Wednesday when it announced earnings that nicely surpassed general estimates, particularly on how much profit the company produced.
Yet Facebook's shares dipped relatively quickly after the earnings were released.
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The shares rebounded about as quickly as they fell and were soon trading slightly higher, but the dip seemed to defy immediate explanation by most journalists that follow the company (including myself).
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Just a little while later, Facebook shares would drop sharply.
Taking a step away from the markets, Facebook's growth remains almost incomprehensibly strong.
Every day, Facebook sees about 1.18 billion users. That's up 17% compared to the same time last year; it's growth that far smaller companies would kill for.
The remarkable thing about Facebook is the way it has turned itself into a dominant player on smartphones. Almost 1.1 billion people per day use Facebook on a phone, up 22% compared to the same time last year.
User growth is great, but what about the cash? Facebook is making a ton of it — more than $7 billion in just the past three months, turning that into $2.4 billion in net income (a measure of profit).
That last number might have been why Facebook's stock took a sudden dip, as it came in lower than expectations and appeared to be the only disappointing figure in Facebook's entire earnings report.
Analyst Jan Dawson noted that Facebook is mostly dependent on advertising for its money.
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So why the tepid reaction from Wall Street?
Facebook at this point is a victim of its own success. The company has proven so reliable at demolishing its earnings that at this point there's not much else Facebook can do. Aside from breaking out one of its other companies and displaying significant success in Instagram ads, Oculus Rift sales or WhatsApp user growth, Facebook's success is already baked in by investors.
That can mean Facebook's three-year Wall Street fairy tale is coming to an end. The company will now either have to keep on demolishing its earnings, demonstrate significant success in a new market or reveal a new product to impress Wall Street.
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Just minutes later, investors would show just how lofty those expectations have become.
Facebook's Chief Financial Officer said during the earnings call that the company's ad growth will slow because it won't try to cram any more ads into its service.
That was enough to knock it shares from about flat to down 7 percent.
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It was fun while it lasted.
Topics Facebook
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