had a somewhat disappointed report and we'll see if amazon has been the lead dog for this market all year if you can tilt things one way or another, and i do think the trade is getting a little bit tired, the trades that we'll see in the short term matters. >> we'll have to leave it there. what a busy couple of hours and i'm sure the fumble continues. "fast money" begins right now. ♪ ♪ it is an earnings extravaganza, ford, visa, paypal, gilead, qualcomm and advanced microall in the session. reporters listening in on the conference calls bringing you instant reaction from wall street and of course, there's the big kahuna and that is facebook the stock getting crushed following the revenue and daily active user miss and the stock shedding $50 billion in market cap in just the last half hour and julian boorstin monitoring the call we'll get them in, and we start

with hopes of victory in the trade. war stocks soaring into the close. the dow jumping 130 points and the nasdaq closing at a record high and the s&p 500 now within a hair of its record high. let's get to kayla tausche in d.c. with the latest details >> after several hours behind closed doors, delegations from the u.s. and the european union hammered out an agreement to begin a dialogue to talk about lowering tariffs across the board for non-auto industrial goods in the president's words also, they are going to talk about sending more u.s. soybeans and natural gas to europe, and according to president trump in response to that, each side will lay down the weapons that they've been using in this trade war. >> we also will resolve the steel and aluminum tariff issues, and we will resolve, retaliatory tariffs. we have some tariffs that are retaliatory, and that will get

resolved as part of what we're doing. >> according to the european commission president jean claude junker who spoke after the president said so long as both sides continue negotiating there will be no new tariffs put in place. that would seem to suggest that the u.s. will not go forward with auto tariffs that the president has been suggesting to punish europe for unfair trade as he sees it in the auto industry we will see whether that is actually how this trade negotiation plays out because i heard from the european commission spokesperson right around the time the two leaders were speaking and asked about the deal specifically and she said no concessions were made and this is a deal to keep talking and for now, melissa, this is good news for the market and it buys the u.s. and europe some time to work out their differences without having this play out in real time and with real business at stake >> the steel and aluminum tariffs, those will remain in

effect until they are officially resolved >> that is what we understand. the white house put those in place for europe just on june 1st. europe had been exempt initially because some of these negotiations were going on, and the two biggest priorities for the european union in coming to washington today, number one, to get those steel and aluminum tariffs to be rolled back for europe and number two, to keep any new auto tariffs from being put in place it would seem that they were able to win both of those items. >> all right kayla, thank you kayla tausche in washington. so given these developments, simple question tonight. is trump winning the trade war, guys >> is trump wing the trade war president trump and the united states are winning the trade war right now. our markets are effectively unchanged and it's probably down 15% to 16% so if you look through that lens, yeah, i guess i'm winning the trade war. given the context of your

question, it's the highest we made in january and given that spectrum we are winning, yes. >> we've had comments about the fed and we've had comments about the dollar and comments about some of the places that are concerned and we pushed back on the fed and right now it looks like we're getting three hikes and not four and you have a dollar that was a runaway train and it's absolutely failed at 95 at a time when we're getting largely fantastic earnings we're looking like we want to chase or trace or retrace whatever you want to say, 28.76 on the s&p is right around the corner >> we're winning i would say we are winning had we won no that is too premature to say something like that. the markets speak for themselves and the reactions in terms of the earnings themselves. i love the fact that we have focus and the financials came out and who outperformed last week it was the financials and we looked through and now we're

getting more ask more the industrials. >> i think there's no doubt about that they also produced numbers that i think everybody looked at and said you know what these are pretty dog gone numbers and the industrials have looked better and take a look not just at fang and how about the fact that today we have microsoft leading the dow. how about we see cisco some of the other names, old names including tintel throwing a micron under the names and outside of fang are working right now. >> for there to be no further escalation for europe, that's a win for the market. >> i'm not sure the markets are proper to think about. when you think about it, autos were the host heavily affected by this tit for tat with europe and the president used to talk about the german automakers just yesterday. bmw has their largest factory in south carolina so when you think about what those tariffs mean and they export them to europe, to asia and all over the place and a 25% tariff puts our workers at risk and that's why it's very important and it's complicated

i don't know if the market is the best lens and i'm just saying if this ithing were to no play out then we know we still have to do canada, we still have to do mexico and those are massive trading partners for us and we think about the $380 billion trade deficit we have with china we treat it much more with the border partners and this is just one step here and the president calling europe our foe last week when we were in europe this is the easiest one for him to get a win here because that was the leverage he was trying to use >> junker, he was not backing down coming into this and he said stuff like these tariffs are stupid and we need to talk to each other, not at each other, et cetera, et cetera, and what we're pointing out here is if the u.s. has been aggressive in the face of what would have been -- let's call them disadvantaged trade relationships across the world and now there's conversation where they'll improve and there

are no tariffs that go through, it's a great deal and we're subsidizing s subsidizing soy farmers and it's a good trade. >> it's not the best lens and this show is tapped with talking about the markets so for the function of this show that's the only lens that i should really talk about frankly, i'm not qualified to talk about the market over the last 11 years and i'm definitely not through a geopolitical lens and you see what's going on here specifically on a day when the market could have easily been done and s&p closes up significantly and it's up 200 points. >> the lens today was very clear. where were we when that news sort of broke that this was starting to get worked through we went from 50 -- so there was reaction right or wrong, was there a reaction to what they were seeing you have to give it to them.

say he lost it, and the chinese thing resolved himself if he did use the 30% gain that he had and this is going back to the markets and the u.s. stock markets to ney gosch ret a difficult situation, then he's geniu genius. >> i'm bracing it a little bit i don't think anyone likes the way, and there are diplomatic matters that don't piss them off. >> if you had used diplomatic means the outcome would have been the same or would have been better or what not >> i understand what you're saying that's why the man was elected president to a large extent. he will say we tried to do it your way for 50 years and let's try to do it my way and regardless of what you think about him and his administration, his way appears to be working. >> for now, yeah one company in the

crosshairs of that trade war, ford, the stock initially getting a boost off the headlines and now sinking after hours with the company reporting earnings moments ago phil lebeau spoke with the company's cfo. >> we're looking at shares of ford dropping below $10 a share for the first time since 2012. ford's earnings which came out within the last hour, forget about the second quarter they fell 4 cents short. the real news is that this company is lowering its expectation for full-year earnings and the previous guidance was for the company to earn $1.45 and $1.07 now it will earn $1.30 and $1.50 and bringing you down 11% and the real problem, operation and losses in europe and in china. those are two areas where the company has struggled mightily over the last three months in particular and really over the last six months and with regard to what's happening with tariffs and the cost impact for the company, think about this. the company says that it is going to or has experienced cost

impacted between 500 million and $600 million due to tear of and trade-related issues and here's bob shanks, cfo of ford talking about some of those issues. >> we had a really strong performance versus expectations in north america and ford credit and that's despite the drag that is within north america related to the increase in commodity costs related to tariff-related issues, but we have had issues and challenges in china firstly, but also in europe >> bob shanks saying $500 million and $600 million if you take a look at the big three and all of them reported today and all of them lowered their guidance for the rest of the year trade, a big component of why those companies are lowering their estimates for full-year earnings and melissa, the bottom line is this it's pushing up cost and they're noticing the impact there. the problem is not demand.

there are plenty of people purchasing new vehicles and the cost is on the side of the equation. >> phil lebeau volume is not affected, in other words. it's not that they're not buying cars it's the cost. you wonder if the trade war got settled overnight. the auto trade has been an awful investment and this is a $17.50 stock. i'm sure it's clear to the people that watch the show i've been bullish on gm for the last couple of years and i think you get to a place as long as they continue to assert what they're doing on the top line, we're trying to get autonomous, and we want to be out there in that space and they're reaffirming a long-term commitment and operationally, their margins are fine and headwinds on trade and they took it down to 4 million and that's major and they're cheap. >> they lowered what they thought their future earnings

would be down to $6. now that we've got that in front of us, the stock was off 3%, and maybe 4 1/2. >> absolutely, but i already own the stock and i think looking forward, where is the most profitable area, and that will continue for them. >> here they are in record levels >> facebook getting absolutely crushed following his earnings report and that's a decline of more than 1% plus, another huge story breaking within the hour, the long time ceo gilead announcing he will step down as the company reports results and we'll bring you the latest on that story who did forget about the one true love? we're talking about bitcoin, of course, but it is on hopes that wall street is finally getting onboard the crypto craze, block chain capitals says it could all 'lberske and mirro

hel here to explain we're live at the nasdaq marketsite in times square much more "fast money" on this very busy night. we all want to know about the new thing.

you know, the new, new thing. with xfinity's retail stores, you can now see the latest. want to test drive the latest devices? be our guest. want to save on mobile? just ask. want to demo the latest innovations and technology? do it here. come see how we're making things simple, easy and awesome. plus, come in today and ask about xfinity mobile. a new kind of wireless network designed to save you money. visit your local xfinity store today. welcome back to "fast money," facebook changing after hours. the ceo mark zuckerberg just revealed a key metric. julia boorstin has more. yes, melissa, a metric that facebook has never revealed before it's 2.5 billion that's how many people mark zuckerberg says use at least one of face bokbook's app every monh

2 2.2 billion users. 2.5 billion is how many people use one of the apps which could include messenger, whatsapp, and these are instead active accounts and you won't have duplicates in there. it is an accurate net of how big and wide-reaching facebook is. sher sheryl sandberg is starting to talk >> we'll see you then. >> you called this decline in the shares last week >> without breaking my arm and patting myself in the back the stock is trading where it was two weeks ago. it went parabolic when it broke out at 195 i think it is up 45% from those april lows, post that cambridge analytica scandal. i think this enthusiasm just got a little too much. >> when you think about it, what are you focused on here? the u.s. and canada.

$185 million users and and how much can they monetize the existing users and that's why they're giving us new metrics and it's important to remember that the average revenue per user in the u.s. and canada is almost that of europe so when you think about gdp and the regulations over there, causing users to decline it's not the biggest deal in the world. so really the issue is what is the fallout from all of the expenses that they have to deal with this election that's coming up, to deal with all of the issues that they have. they told us last year they were doubling employees from 10,000 to 20,000 and we know -- the margins are not the issue for this company let's be clear and to me, i haven't been bullish on this last run in facebook, and i've been run for the scale that these guys have and for the size of this company, this is arguably the most compelling of profitability and growth and the ability to have margin. north of 60% of the margins and yes, they've been squeezed a little bit and that's the story.

the big story for me is exist earn and are these guys going to the police where it's a parasite >> what are you doing with the 9% decline >> you do. i love the vertical. we pulled all of the way back to where it was two weeks ago i was looking at july 6th and it was trading around the $200 level and the focus was and the anticipation was and hey they're probably going to miss on some of the monthly active users. so i think that should have been expected it looks like the reaction's telling us it wasn't and everyone is selling it off i think that creates opportunity and this is a company that trades at a reasonable multiple and instagram and mess efrnler and they'll be moving more and more to the video side of things and this is cheap at $200. i'm getting old, so i forget we started with the game trade it or -- >> with the duck >> fade it, trade it >> don't get me started. >> facebook! >> we said, listen

the rally is in earnings and i thought it was a rally post-earnings and then faded we got it half right and that doesn't really count >> i shot that duck dead just to be clear. >> huh >> i shot the duck dead. >> that's not how you play the game >> the pot calling the kettle black. >> i don't think -- listen, they didn't miss revenues by that much and they beat on eps and it's not a disastrous quarter. the point is it's rallied from 145 in march and april to $218, and that would be a significant move i don't know if you'd buy at 185. if it gets to 185, 190 it's important to remember that there were years and years that google underperformed all of these other big tech stocks and it happened when they started ratcheting up spending and the spending that they're doing right now and this is facebook and based on your exist earn risk that at some point is going

to be priced in here, so this is one that could be in the doghouse for a while and it has to hold the breakout level which is 196 >> let's bring in gene munster who joins us from minneapolis. he is on the call with redstone. good to see you. >> hi, mel is this roughly 9% decline in the after-hours session is that warranted the myth >> i think it definitely warranted the myth it is critical this is a social platform and we talk about the expense piece, but engagement is paramount. whenever you see a company start to change their metrics and come out with a metric like they did tonight. to me that's an indication they have outstanding management, but as they're trying to change the conversation and they know full well that they're running into some large numbers and also, gdpr in terms of the impact and engagement i think that is a critical question to how this plays out and i understand that concern and keep in mind, they just

rolled out europe as they roll out to other countries will weigh on the optimism in the next couple of months. >> why do you think wall street and investors missed the impact of gdpr on europe? >> they told us it was going to happen last quarter. they couldn't have been more clear and the reason why they missed it is when they've said negative or cautionary comments in the past they always blew right through them and so as a former analyst that covered facebook, you would look at that and say they're just trying to keep the barlowe and the analysts simply ran ahead and there will be models that will have more moderate, dau and mau growth for the next few quarters >> another adjustment to the model, would that be spending and 40% and 60% and facebook hit it right in the middle. >> the adjustment i'm talking about is bringing some of the, in au and dau. >> in addition to that in addition to that, will there

be an adjustment to the spending expectation? >> i think there will. >> the stock took a little bit of a turn in the last few minutes and it drifted to 9% right when zuckerberg said they'll have more and the fact that they'll invest in security and continue to invest in new products will be negative for profitability which tells me that is code for even though they're given that expense guidance and there may need to be additional expenses that analysts will have to load into the model. >> what's your grade on the quarter, gene? >> i'll say this say c +, and the reason that this company has historically blown through the numbers we didn't see this in the top line and a miss on the important engagement number. i am glad to hear mark zuckerberg talking about some of the debate around the social value in facebook and putting it all together it's a c+. >> gene munster. >> thank you >> that's a top class. >> as a professor, i would have taken -- i would have cut that

class. >> i probably did. >> c+. >> for a stock that was at a record high. >> that'sfailing >> that's a failing grade. >> that's like you getting a b-plus and you're miserable. >> it would never happen >> if you look at the litany of companies that's probably a b to b-plus quarter >> at a record high. >> gene said something important and they've been telling us since november 1st that they'll ratchet up spending and they've been very forthright where they haven't done a good job is the other issues and explaining some of the questions they have about the utility of the platform and some of the risks that they have going forward and listen, let's just remember this that that first week in november, what happens in our midterm election, this will be probably the most important event for this company going forward. >> won't that be big >> not because i own the stock which i do, but it's the narrative that he said, well, they pushed away from what they'd always focused on in the

past. >> to a new metric isn't that concerning? >> if i'm an apple. >> ask we could have the whole apple discussion and he went and said it's about services and wearables and lots of other things and not just the phone anymore, and now i think the phone is -- >> the phone is not important and take a look at services, instead. >> they still had growth and it wasn't the growth that everyone expected and i'm thinking to myself, they have so many verticals right now where they can make money. >> just to be clear, instagram is now a business that they should be talking and you'll get 6 million total advertisers in the combination of instagram and the rest of the platform that's impressive. >> we'll see if they update us on instagram by the end of the show still ahead, another huge story. chip giant qualcomm said it will terminate its deal at midnight and instead buy back stock

take a look at share, up 6.7%. i'm melissa lee, and you're watching cnbc, first in business world wide in the meantime here's what's coming up on fast. >> as bitcoin continues to surge, a top crypto hedge fund nar idt looks to clear one key level before it can really move and he will reveal what that is when "fast money" returns. - anncr: thankfully, prevagen helps your brain and improves memory. - dad's got all the answers. - anncr: prevagen is now the number-one-selling brain health supplement in drug stores nationwide. - she outsmarts me every single time. - checkmate! you wanna play again? - anncr: prevagen. healthier brain. better life.

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>> welcome back to "fast money," visa and paypal has reaction >> let's take a look at shares of visa. choppy trade growth and cross-border growth and key metric came in slightly lower than expected and the ceo on the call blaming the stronger dollar, but did emphasize on growth opportunities in europe and digital pages in emerging markets will help fuel future profitability. >> in latin america, we made a strategic investment in yellow pepper, a mobile payments pioneer in the region to help

accelerate innovation and digital paymentech tech. >> it will increase token opportunities and increasing access to our apis and expanding the usage of push payments via user direct. together, we're working with more than 70 clients in the region >> analysts making the point that visa has got more than payments at play with the investments with the square, company, and stripe. james freeman, a market maker for visa said a new tax regime is clearly helping visa shares and the key controversy this quarter will be whether visa can narrow the performance gap versus mastercard. both credit cards are trading near all-time highs and mastercard does report earnings tomorrow paypal, the payment processing company issuing weak third quarter client, and it's setting a fresh all-time high and earlier today, nomura expects shares to be under pressure on the back of today's prints

melissa? >> thank you >> mastercard and visa >> it's changed for a decade now and we've all been right on this the problem now with both these names and mastercard and visa, it comes down to valuation both are trading somewhere between 20 and 29 times forward earnings and they've grown into their valuation and that's been true and their operating margins continue to be ridiculous in the form of 66.5%. here's what would concern me, though what does amazon do? they look across the landscape and say who has ridiculous operating margins? look at visa and mastercard. where can we disrupt you have to be concerned at some point if a company like amazon would say why do we get into this i'm not saying it will happen tomorrow, but when you have operating margins like that you have a bull's-eye on your back valuation has to be a concerned. >> you have to be more concerned about paypal because think about it, they have 100 million prime

users and that is an existential threat they closed today near 92 bucks so it's giving a lot of that back and it's not too different than facebook. the stocks are not trading back at the prior breakout levels and these are levels the stock should consolidate at all-time highs. >> would you rather -- >> visa or mastercard? >> paypal. >> i agree with dan that you can consolidate here and venmo, i think the choice initiative are undervalued and i think they're asset light here and i would stay in the name >> i prefer visa i like paypal. >> i didn't even ask you -- >> oh n. >> just kidding! >> go ahead! >> that was a little offensive >> anyway, but paypal, i do like what they're doing, and i like the acquisitions they've made of late and they paid a couple to expand themselves and their multiple is far and above what

visa and mastercard did, and i think visa is an opportunity and i think that's a better name >> i always want to know what you think, pete. i'm just joking. >> the possibilities with crypto what does it mean for bitcoin which has been surging this month and spencer bogart joins us now spencer, good to see you it came back to the mastercard announcement last week, do you think this could be a major catalyst for crypto? >> you know, i think that the way to fail in crypto is to think that ip and patents will be your path to success. in general, look, any of the incumbents will have a hard time in the space and it's very difficult and it's a dynamic space and you need to be focused on with the quintessential disruptive innovation with entrenched incumbents like mastercard. >> i feel like the last pipe we spoke, spencer, bitcoin was, like, $1,000 more. >> what do you make of this recent run and do you think

we've seen the lows in bitcoin for the year >> it's possible we've seen the lows and i'm definitely expecting to see new highs and on prior times i've said expect to see now lows before new highs and that low might already be in and it is a tinderbox, waiting for you to go higher, whether it's an etf, and it could send bitcoin exploding higher. >> that is the notion that etf approval is just around the corner when there are still a lot of issues surrounding etfs and namely the custodial issue where do you see us in terms of the innings and where we are with etf approval with the sec >> yeah, listen, everyone is reading tea leave hees here to anticipate, and in 2019 the sec will be thoughtful and take some time, but listen, the cat's already out of the bag here. retail investors are getting

exposure to bitcoin and crypto through company cans can like coin base and institutional investors are getting exposure to crypto via bitwise asset management in coin base and meanwhile, europe already has crypto etps, right so the things already exist on the market and that innovation is going elsewhere if the sec gets onboard soon. >> it looks leak a cold summer out in san fran, take it easy. >> you guys are allocating across platforms and across tokens and what's the most exciting part of this space right now? >> you know what it's from equity s.t.a.r. kittyo my point of view we've shifted our focus considerably toward traditional equity investments and we are finding great opportunities there. >> spencer, we'll leave it there. thanks a lot good to see you. >> thank you very much >> block chain capital

>> i think the headline that explodes the whole crypto universe is around custodial so the institutions can get clarity about how these assets will be held and thou they can report them it's lights out. that's the big one >> why wait for that >> the infrastructure has to be built -- >> no. he mentioned coin buys is the onramp for detail and corn base has made a bunch of announcements and now you're just waiting for the regulatory framework. you mentioned that the sec. >> if that's a certainty which -- >> i didn't say it was a certainty. >> you're saying when that happens. >> would aren't you want to jump in right now if you think that's where it's going. >> it just rallies from 5500 to 8300 and it sounds like that's part of it >> he just -- still ahead -- all

right. if you're just joining us, massive news after hours, facebook plunging 17%. siedech giant gilead's ceo just regn and it will terminate its deal with nxp. the reporters are working the stories and we'll bring you the very latest. we're back right after this. or. sending your own clubs ahead with shipsticks.com makes it fast & easy to get to your golf destination. with just a few clicks or a phone call we'll pick up and deliver your clubs on-time, guaranteed, for as low as $39.99. shipsticks.com saves you time and money. make it simple. make it ship sticks. tap one little bumper and up go your rates. what good is your insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today.

liberty mutual insurance. ♪ liberty. liberty. liberty. liberty. ♪ california had the worst wildfire season on record. scientists say, our weather is becoming more extreme and we all have to be better prepared. that's why pg&e is adopting new and additional safety precautions to help us monitor and respond to dangerous weather. hi, i'm allison bagley, a meteorologist with pg&e's community wildfire safety program.

we're working now, to enhance our weather forecasting capabilities, building a network of new weather stations to identify when and where extreme wildfire conditions may occur, so we can respond faster and better. we're installing cutting edge technology to provide real-time mapping and tracking of weather patterns. and we use this information in partnership with first responders and california's emergency response systems. to learn more about the community wildfire safety program and how you can help keep your home and community safe, visit pge.com/wildfiresafety >> welcome back to "fast money," facebook getting crushed and the stock is down nearly 18% let's get to julia boorstin in

los angeles. >> facebook shares dipping even further on the company's financial outlook. this warning about slowing revenue growth from the cfo sending the stock plummeting take a listen. we don't have the sound bites and total revenue growth rate will accelerate in 2018 and we expect the revenue growth rate to decline by high single digit percentages from prior quartersy is kwshlly in q3 and q4. rainer reiterated the 2018 total expenses will grow in the 50% to 60% range. he said looking beyond 2018 they anticipate total expense growth will exceed revenue growth in 2019, and he said over the next several years we anticipate our operating margins will trend toward the mid-30s on a percentage basis that's much lower than the 44% operating margins the company reported this quarter for context q1 had 46% operating margins and

q4 had operating margins in the future mark zuckerberg also talked about the company's investments in protecting users and safety and security will impact margins. here is zuckerberg >> we will continue to invest heavily in security and privacy, and we have a responsiblity to keep people safe, but as i've said on past calls, we are investing so much in security that it will significantly impact our profitability we are starting to see that this quarter. in addition to this, we also have a responsibility to keep building services that bring people closer together in new ways, as well. >> melissa, it will be interesting to see what the analyst reaction is after the call going into the call we heard from a number of analysts who still feel like the fundamentals of the company are strong and there's been a lot of call about the strength of instagram and

the new number, 2.5 billion numbers using facebook's different app over the course of any one month and right now we see facebook shares are down 19.1% and we'll see how much these warnings about revenue and margin deceleration will be problematic for analysts as they respond to this. back over to you >> julia, did they say why they're seeing such steep declines >> a lot of it is due to the investments in safety and security as we heard from zuckerberg in that sound bite there and they're talking about the importance of investing in safety and security and also investing in innovation, and how the combination of those two things are going the call is ongoing and the analysts are asking their questions and really wanting to understand >> is it worth noting that back in q3, zuckerberg talked about the investments in safety and security would impact profitability and for a while, the property has been warning

that they're not going to add as many ads to the news feed and that would impact profitability. we haven't seen the impact of that yet, and that could be playing into this as well. >> julia, thank you. >> facebook shares in after-hours session, and the decline exceeding 20%. if we want to take a check on some of the other things we are seeing declines across the board and most notably, and amazon has yet to report google and it is down by just about 1% right now. in terms of the explanation and increased spending i understand how that impacts margins and how about revenues and why are we seeing a revenue decline that has nothing to do with increased spending for anything >> single-digit declines in revenues is extraordinary for a company boasting 2.5 billion and it should have network effects and this is concerning and the delta on the expense growth will outstrip delta in 2019 and the whole security thing, spending

tons and tons of money on security doesn't mean i'll get it right i think the spend on security is the cya. these guys have a lot of people that are all over them and -- >> we don't know what the return on the spending is that's the problem, you know what i mean? >> that's my point we'll spend, spend, spend to show that we'll have the spend. >> what are they doing they're bouncing people off the platform they're having less engagement because they're bouncing people off the platform >> they're making investments. >> i know, but think about it. if we had data over the last couple of weeks and the 10% of facebook's accounts may be big and they're just botched, creating activity and that user rates and ad rates are being generated off that activity. >> explain revenue >> i agree with you. >> you're talking about the revenue line and i think the expense line is something else and again, my point is i think they will spend, spend, spend, because they have to they transgresed

>> that also leads to the question, should we re-rate this business entirely because a certain percentage -- i mean, it would be reiterated right now >> and they downgrade. this is a company that saw their stock go from 200 to 150 from the highs in february to the lows in late march and so, you know, their risk parameters have been widened about what they're willing to say >> the question that i had was when you look back -- when you look back, do you have to think that a certain percentage that they had reported on which we rated the company before were false? >> if you had a cleaner facebook now, is it better for them a year from now? they're cleaning up their act now and the head count was up 47%. >> you want an explan asian in terms of expenses? >> to foot's point earlier

they haven't significantly changed. if you recall, this was a $175 stock and pre-cambridge analytica. we basically retraced that entire move and it puts us back to basically early spring. so it's from perspective and it also makes sense now >> by the way, we've erased the gains on facebook for the year let's get back to gene munster, and he's still with us he's been listening in on this call on the red phone. gene, are you there? >> yes >> yes, i am i mostly want to walk through and simplify what's going on here is that the three-quarters, and several of my interpretation is three high single digits is eight and that means that there is a 24% deceleration in growth they just did 42% so if you extrapolate that, that means we'll hit q1 of '19 somewhere around 18% growth and the street

right now is at 35% growth so this say measurable re-rating of the growth rate i suspect even the numbers will be better a year from now and the best trajectory that the analysts will have if you look at the 2020 numbers and the street was looking at 24% growth, the new numbers will be 14 to 17% that kind of explains it and at the core, why is this actually happening? >> that is still not fully understood some of it is related to engagement and yield and advertising yield. >> are you comfortable that the company has a good handle on how much they will actually spend come the next quarter or how much revenue will continue to decline going into the back half of the year? >> this is an unprecedented guide down so i think they are taking more probably of a measure than they

need be. maybe it doesn't end up being 2% we're not going to have another issue next quarter so they ratchet it down each more. they've taking dramatic steps to resetations and it still is represent you have of a new view that investors have to have about facebook. >> this is a historic decline for facebook, down 22%, gene what do you do with this stock down 22% >> i think you need to let it settle out here. there's a good chance that they do, in fact, end up getting some of the lower numbers and we shouldn't be having that conversation over the next couple of months and stay on the side lines and the investor based process is and where things are at in two months. >> is this the earnings saying that sinks the group >> we saw netflix and it was

traded like an idiosyncratic story. we are seeing amazon which has yet to report and that's down 2% netflix is down 2% alphabet which i had reported had an a-minus quarter according to you is down by more than 1% >> i think the thing is largely intact i think that facebook and netflix are the less desirable of the fangs for a lot of reasons and not just for what's going on today, but i think the substance of the thing, google and apple and amazon have such big growth opportunity ahead of them over the next several years that i don't think there's anything that is going to fall apart with fang as the leader. >> this is pete najarian you talked about unprecedented guide down and this was totally out of left field and the way the stock is reacting shows that, you said you probably need to stay away for a while how long is a while? how long do you need to get away

to let this settle down? is it less time than that? is it more time than that? it's two or three months with the one-quarter period you may miss a bounce here there's that risk, but i think the prudent approach here is let this flush through all of the analyst models and people, and i'm sure you'll have a lot of analysts give it, and this is a big buying opportunity and it's not down 22% tomorrow and largely stay away from it for the quarter. >> hey, tim, what about ad growth >> if you look across the entire plat form, they'll wait for the metric, i realize, but are they geing concerned here >> i haven't seen material advertise are advertise terse leave the lat tomorrow. >> in my opinion loyal to

facebook, and this piece is on engagement and impacts revenue and to trigger mtv and that's still not having a positive impact there's something around the engagement and they still have the support of advertisers and we're figuring this out in real time >> hey, gene, it's dan last week ceo markic zerbe zuckerberg said they put an application for a new venture in china. is the timing coincidental because china is the most important market that they'll never get into unless they make big headway and this is the only way the company can grow users again. >> china is the biggest x factor there's messenger and whatsapp and what they can do, and we're talking about engaging and that's the key topic today china is absolutely the biggest and it is something that most u.s. tech companies with the

exception of apple and they've not been successful in china book would have to a prech this and i don't know culturally how they line up. >> a lot of analysts and investors were just in awe of facebook shares after that steep bounce off the cambridge analytica lows and here we are, we're what $15 or so away from those lows once again do you think we've reached those? >> i don't think we get that low. i think we'll probably get a little bit of bounce where the loyal facebook crew comes in defense tomorrow and says it's not that bad, but i think that in general this will be rangebound and i don't suspect we'll get below those cambridge analytic levels. >> not gene. >> gene, hold on guy, do you think we breached. >> if i remember right, it was 144. >> is it 144

>> 185, and let's get a los angeles around these level, but here we are retracing the whole thing. frnlly, i'm hard pressed to believe we get there i do think a cleaner facebook is in everybody's best interest, but so many people piled in. the stair's up, elevator down. >> i go to you as a facebook holer. >> what will you do now that the stock will be range owe bound for now not. >> i think gene's brought up a couple of different types and they'll defend themselves and say why will this have a bit of a bounce >> it is opportunity, and i am frustrated because this kind of came out of left field and gene said unprecedented diedown this really was. this wasn't forecast at all. front of us, that these issues and these revenue numbers were

anything close to what they are. >> in terms of the stock, though, to hold onto it. do you sell? >> i will hold on to the stock the calls that i actually own in there, as well will go to zero, and it's going to give me an opportunity to make decisions over time. i will be buy writing this. >> okay. selling calls against your position. >> as gene was saying, as well they probably have overshot to the downside in terms of the guidance and if that's the case, maybe we'll see some numbers in the future that are better than what we're talking about tonight. >> think the overall impact of the market here, too, is when you think about netflix andis inbooin facebook and i realize a different valuation story because people, can argue it's cheap. if you're growing at low teens with this price, it's not cheap at all so the sentiment and the euphoria and facebook is a

company with still a lot of questions and not necessarily answers. i think the market needs to address the whole thing. >> i think this says a lot about market sentiment every day on this program, and every hour on the hour, we talk about fang, fang, fang and let me talk about a cult following and this has been a pr train wreck for over six months and every time zuckerberg opened his mouth it was one disaster after another. as recently as last week and to me, the fact that investors brought this up to an all-time high where they've been materieling us for three quarters that they're hiring here and they know they've had this huge. did we have any sense at all that when they were saying it's going higher that it was going this high. >> look at the margin numbers and 40% revenue growth and it's stunning over $50 billion in sales this year at some point it had to cool out. >> it was dropping >> that's what i'm saying. no one believed it

>> and gene just said that >> gene, is still on the phone hey, gene, do you think facebook should have warned >> no. they did everything they could and people were intox waited here and so they just missed it. facebook did everything they could. they told us last quarter that this would have an impact on engagement engagement and it was a simple connect the dots and nobody did that. >> everybody missed that warning? unprecedented down, and this is an unprecedented miss on the part of wall street analysts >> i absolutely think it is. i looked at the numbers tonight, i wasn't expecting this kind of reaction and but was surprise that they were looking for dau and mau growth to the level that they were. i think it is -- it's an example of just group think around the story and i don't want to throw facebook under the bus than we have here, but that's what happened i don't think facebook is to

blamed and i think the analysts and investors are to blame. >> read through the broader market, and we'll make an all-time high seemingly every single day do you take it that far and is it facebook specific or does it not even matter at this point? >> i the other companies will be impacted by it, and they're at all-time highs, too and people are getting nervous and if you look at other companies, like take, for example, apple generated by much stock you can buy, and it's a very different story than facebook which is a social platform. companies like apple and google that are fundamentally changing the world, and i thought tech investors can rest easy that there are still decades worth to come >> is there another stock in the coverage universe that you think gains on the back of this? >> it's a no-brainer it's apple and this has been the one that people are reluctantly liking most people, 75% are market

watch reported believes that amazon will reach a trillion before apple and they have a massive buyback that will company with the net cash neutral to stabilize the business and even though it hasn't been an exciting story and the substance of investor gains will be in apple of all places. >> gene, thanks so much for your analysis and getting back on the phone quickly for us we appreciate it gene munster on this decline in facebook shares. they're down by 24% and let's get back to julia boorstin anything else out of the conference call? >> interesting comment from sheryl sandberg to ads in stories and that was discussed in one factor that could potentially hamper growth. she said that right now stories and monetization is not as strong as ads in the news feed and there is a question that at some point stories will make as much money for facebook as the news feed ads are.

there say huge opportunity because the ads are considered authentic and there is a huge opportunity to grow and there is a huge potential for inventory there and too soon to say whether they'll be able to make as much money from the ads that are obviously so prominent in instagram. just one other note here on gdp are that european privacy regulation and the cfo saying it did not have a significant impact in q2 partially because of when it went into effect and there's one month of impact in revenue. they do think there will be some modest impact and they do say that the vast majority of their users are still opting in to allow facebook to use data and their information to target them so saying that they do expect there to be some impact from how advertisers use their own data for targeting, but they're trying to walk through there and the full impact of gdp of which we'll see more of in this next quarter. back over to you

>> julia boorstin. shares are down by more than 23%. we've been talking about the unprecedented down with the shares to put it in perspective and this is from pension partners' charlie borello, it is equivalent to the market caps of ibm, mcdonald's and nike combined that's how big this drop is. >> look. it's massive and again, this is an overweight stock and a very popular trade as dan has been pointing out twitter, by the way, reports on friday and they've been trading alike in these kinds of situations and people compute the same problems that they have with security or the lack of legitimacy with the underlying accounts and watch that one. bottom line here is there's a lot of people that are questioning how facebook is spending money on its security i know i am. i know they're spending a lot of money and i don't know what they're doing and i'm not sure it's effective. >> gene munster says apple is the beneficiary of the money flowing out of facebook.

>> if that's the correlation >> in terms of lew taking money out of facebook, it makes as much sense as anything else or you can say people take money and put it into banks and the environment seems to be clearing up, as well. i can't answer that. i will say the market is the ultimate arbiter and apple is smaller in the after market. >> listen, the thing to watch is amazon tomorrow. is anything there? did the price increase cause prime users decline? did aws margins go down? if all of these things were to happen and amazon could start steam rolling lower. i know google had amazing earnings and to me that's the big one to watch tomorrow. >> shares are down 2% in the after-hours session on the back of this massive guide down from facebook and the fallout impact on the complex a show of hands here, guys who would buy facebook on a 23% decline that we're seeing? >> show of hands >> nobody. >> in the timeframe it's right

back to where we were before the cambridge analytica. >> you sell the 150 put out in september. if you want to get long it and that's the way you do it and that was the low. >> this is both sides of the balance sheet, folk. >> that doesmorning. facebook shares down 23% "mad money" starts right now my mission is simple, to make you money i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica other people want the make friends. i'm just trying to make you some money. my job is not just to entertain, but to teach and educate you so call me at 1-800-743-cnbc, or tweet me @jimcramer. tonight i want to share some of my accumulated wisdom. believe me, i've been doing this thing for a long time, because there are so many different thin