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Why Facebook Stock Fell Today

By Joe Tenebruso – Oct 26, 2021 at 6:52PM

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What happened

Shares of Facebook (META 1.30%) sank 3.9% on Tuesday, following the release of the social media giant's third-quarter results. 

So what 

Facebook's revenue jumped 33% year over year to $29 billion, driven by continued growth in its core digital ad business. Those gains, however, fell short of Wall Street's expectations for revenue of nearly $29.6 billion. 

Facebook's monthly active users of 2.91 billion and average revenue per user of $10 also fell short of consensus estimates of 2.93 billion and $10.15. 

A stock chart that falls and then stabilizes.

After its post-earnings decline, Facebook's shares could be nearing a buy point. Image source: Getty Images.

Still, Facebook remains enormously profitable. Its operating income surged 30% to $10.4 billion. And its earnings per share of $3.22 actually came in ahead of analysts' estimates of $3.19. 

Now what 

Investors are concerned that Facebook will find it difficult to navigate Apple's new privacy restrictions, which have dented its ability to target its customers' ads. Facebook offered somewhat muted guidance to account for these challenges. Management anticipates revenue of $31.5 billion to $34 billion in the fourth quarter, while analysts' forecasts had called for $34.8 billion in sales. 

Additionally, Facebook is dealing with a maelstrom of criticism and scrutiny from regulators after numerous reports of the company failing to properly address misinformation, hate speech, and other troubling behavior on its sites.

Yet these concerns are arguably already reflected in Facebook's stock price. The social media titan's shares can currently be had for less than 20 times its projected earnings for 2022 -- a relative bargain compared to many other growth stocks.

Facebook apparently thinks its stock is a buy. The company increased its share repurchase program by a hefty $50 billion.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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