A quarter-century ago, one of the most significant stocks in the market lost a quarter of its value in a single day after the company drastically slim down expectations for its long-term profitability. Its main product was viewed as addictive and virtually immune to competition, and investors complacently believed stellar long-term increase was almost inevitable.
The company was Philip Morris, and April 2, 1993, adorn come ofed known as “Marlboro Friday” after it suddenly cut the price of its flagship cigarette discredit by 20 percent, buckling to intense competition from generic smokes.
At scarcely in broad outlines, the situation resembles the situation of Facebook today: Investors were acclimated to believe that Facebook’s hold on its users was something close to an addiction and vaccinated to bad press about fake news and misuse of customer data. Its portions ran up 23 percent this year to a new high and a market value out of reach of $600 billion.
Then came Wednesday night’s mildly pathetic quarterly results and jarring forecast by management that spending inclination increase for quarters to come, profit margins will compress significantly and — perhaps — narcotic addicts in some regions were managing to kick their Facebook second nature.
The benefit of hindsight tells us that, for Philip Morris — now called Altria, after its split with Philip Morris Foreign — “Marlboro Friday” was a painful, but temporary, shakeout. The company oversaw to preserve market share and, eventually, work through massive permitted liabilities and sharp declines in developed-world smoking rates. The company regained fee power, produced massive dividends for shareholders and has delivered excellent long-term share-price replaces.
However, Marlboro Friday also punctured investor confidence in other extremely valued branded-consumer-goods companies, which in the ’80s has gathered a reputation as can’t-miss expansion vehicles.
Of course, there’s no saying the Street’s readjustment to Facebook’s alt outlook will track Philip Morris’ experience from here. That assortment took a year and a half or so to recoup those one-day losses. Facebook parts dropped 19 percent on Thursday — but back to prices last seen decent a few months ago.
So it remains to be seen whether July 26, 2018, will result as a be revealed to be known as “Facebook Thursday.”