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Revenue Dropping and Slowing Down Consumer Growth at Technology Giants Twitter and Facebook

AMP Capital chief economist Shane Oliver says revenue dropping and slowing down consumer growth at technology giants Twitter and Facebook is basically a warning which the US tech area could actually at some stage underperform - or perhaps undergo a critical modification.

“What those disappointments tell us is there is a limit to the take up of social media,” he says. “At some point, it will start to slow down.”

Oliver states the sector already has to get into good in general, but social media giants Twitter and facebook dissatisfied the marketplace. Facebook’s shares stopped almost 20%, eliminate $US120 billion worth – the largest one-day drop in US stock market history – right after it missed revenue predictions as well as reported slowing down consumer growth.

Twitter shares furthermore slumped 15% right after its user growth came stock with lower than current market predictions.

“Their growth in a number of users seems to be slowing down,” Oliver says. “That seems to be a bit of a concern.”

“To some degree that’s inevitable; at some point, you reach saturation regarding some of these social media sites. I guess the debate is always when that’s going to occur and what impact that has on revenue growth.”

Oliver says the dropping show that there's a likelihood of modification right after the tech sector’s strong gains. He describes a pullback is not likely to be as intense just like the tech crash, which all started in 2000 and finished the tech bubble back then.

“It will be nothing like what we saw at the height of the tech boom back in 2000 when the Nasdaq got to a PE of around 100 times; today we’re less than 30 times, so not nearly as overvalued as back then.”

“But obviously there is a bit of risk that at some point out there the tech sector will lose its leadership of the US share market and go through a period of underperformance, if not a bit of a decent correction.”

To read on the Shane Oliver's full report regarding tech sector click here.