Facebook was up near 27% YTD but is now down 21% since its earnings report. In Wall Street history, this marks the largest loss of market capitalization in one day - 120 billion USD. So what caused this massive downtrend? Although many factors affected this trend, the largest is due to Facebook losing its appeal as a growth stock. Despite Facebook's revenue increasing by 42% and profits increasing by 31%, there is negative sentiment around how Facebook has already achieved the maximum amount of users on its platform. This is evident in how their European user's are declining. Their overall slow down in new users can be attributed to their recent battles with fake news and their privacy issues. To summarize, Facebook stock has lost 120 billion USD worth of its market cap due to its potential for growing nearing its end. Facebook stock may or may not recover but it currently is very unlikely to return to its previous glory at 220 USD.

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Earnings Per Share or EPS is one of the most important indicators when it comes to measuring a company's profitability. Earnings per Share is calculated simply as a company's profit divided by their total outstanding shares. Thus, you can think of EPS as profit per share. You might be confused on how to use EPS when judging to buy a stock. Similar to any other indicator, you must use reference when evaluating a stock with an indicator. To analyze a stock using EPS, you must check whether its EPS is growing quarterly to see if the company is making more money. Different sectors of the market have different average EPS numbers. For example, if I was interested in purchasing Company A shares, I would need to weigh Company A's EPS against Company B and C's EPS which are in the same sector to figure out which company is making more money. If Company A has a higher EPS than Companies B and C and an EPS which is growing quarterly, it would be a good buy ONLY from looking at EPS. However, investing is not so one dimensional or simple as there are many other factors which affect a stock's performance. Conclusively, the higher the EPS, the better. 

 

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Brief Explanation of stocks:

If you are new to trading, you might be wondering what stocks are. Stocks are essentially a share of a company which you can purchase on the Stock Market. Outstanding shares also known as Capitol Stock are the total number of shares (stock) the company consists of. This includes restricted shares proprietary to company executives, public stock and stock owned by institutions. After a company's IPO, the price of a stock is determined by the market and the long term price is set based on how profitable investors see the company. Stocks exist for various reasons. One being that a company executive cannot "cash out" if he or she does not sell their stock. This is because their assets are in the form of equity in their company but not in real cash. Additionally, since stocks change value, being a smart investor able to read the market can help many struggling financially to gain financial independence.

Brief History behind stocks:

As you might have learned in school, buying equity in companies dated back to joint-stock companies in the 1600s. Equity in these companies was sold so merchants could fund the ships' ventures in the first place. However, the stock market broadly known as The New York Stock Exchange (NYSE) was founded on March 8th, 1817. As we learned in APush, the Securities and Exchange Commission (SEC) was formed in 1934 by FDR as a way to regulate the Stock Market.

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