Social Media Stocks Getting Hammered
In case you haven’t noticed, it’s a bad time to be a social media investor. Look at some of these stats:
Facebook (NASDAQ: FB): Down 4.6 percent Friday, indicated another one percent lower Monday, and down 18 percent in the past month.
LinkedIn- Down 6.3 percent Friday and 20 percent in the last month.
Twitter- Down two percent Friday, more than half of one percent in premarkets Monday, and 20 percent in the past month.
Even the stocks that aren’t pure-play social media names are hurting:
Yelp- Down nearly seven percent Friday, indicated down another six percent Monday, and down 32 percent in the past month.
Groupon- Down about two percent Friday and nearly nine percent for the month.
OpenTable- Down two percent Friday and down eight percent for the month.
There are plenty more examples but what is clear is that investors have a bad taste in their mouth for all things social media and anything resembling the space.
There are plenty of theories surrounding the beating. Here are a few.
Everybody knows the game: Sectors come and go. As traders bid up certain sectors, they later take profits and move on to another. Facebook, for example, may be down 18 percent this month, but it’s still nearly four percent higher year to date—outperforming the overall market.
Social Media in Transition
Remember when Facebook was a startup? It was full of young people posting about their life without an advertisement in sight. Today, the platform is much different. Mothers, fathers, and grandparents are now on the platform and it feels like every other post is an advertisement for something.
It’s no longer for kids and while there’s plenty of reports that would indicate the contrary, there’s fear that the platform has reached its prime.
As for Twitter, the company isn’t taking off as investors were hoping. Even as the company gets better at monetizing, without a growing user base, advertising won’t impress investors.
Nobody knows the future of social media but there’s definitely concern that the current social media model is wearing out.
Is there a pullback coming? Everybody has waited for the big selloff for more than a year and there’s no doubt that many of the experts appearing on financial media are seeing the market as frothy. The market has basically gone nowhere in 2014 giving more credence to the theory that we’re at a top or at least a base that could resolve to the downside.
Nobody wants to own a frothy tech stock in the social media space if the market could take a nosedive at any time.
Disclosure: At the time of this writing, Tim Parker had no position in the companies mentioned.
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