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Facebook doesn't shake off earnings disappointments so easily, history shows

Mark Zuckerberg
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Mark Zuckerberg

Facebook earnings reports rarely disappoint, but when they do, it takes some time before investor confidence is restored and the shares rebound, history shows.

The leading social network's stock dropped after the company's chief financial officer warned on Wednesday evening's earnings call that advertising revenue could weaken, while capital expenditures might increase next year.

Even though earnings exceeded Wall Street estimates, we're calling this a disappointment because the stock declined on the results.

The sample size of Facebook earnings-related drops is small since the company went public in 2012 and has generally hit the ball out of the park most quarters since then. If Facebook was to close down Thursday, it would mark only its seventh post-earnings one-day drop out of 17 quarters as a public company, according to Birinyi Associates.

And most of the declines have been rather mild. However, there were drops of 6 percent and 13 percent after quarterly reports in 2014 and 2012, respectively.

Using hedge fund analytics tool Kensho, CNBC PRO looked at the performance of Facebook after those one-day earnings-related declines. So what does history say should happen if you buy Facebook at the close today?

Here's the average performance of Facebook one week out from an earnings drop:


And here's what happened, on average, one month after an earnings report disappointment:


Facebook does eventually right the ship three months out, though it still trails the market.


Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.