Social Networking Beatdown Renews Talk of Tech Bubble

Maybe China was the canary in the coal mine.

Social networking high fliers, Facebook, $FB, Twitter, $TWTR, LinkedIn, $LNKD, and Yelp, $YELP, each tumbled 4% or more by 2p.m., after rising early Monday morning. The moves followed a sharp drop in shares of Chinese Internet companies such as Baidu, $BIDU, Sohu.com, $SOHU, and Youku, $YOKU.

$DIA $SPY $QQQ $IWM from green to red. #Marketintrouble

— Le$ (@lcc007) Apr. 28 at 01:25 PM

At first, the selloff in the Chinese Internet sector seemed a contained reaction to disappointing earnings from Sohu.com and the Chinese government’s decision to halt online streaming of popular American television shows.

But as the selling spread, it became clear that investor concerns about Internet company valuations extend beyond firms based in Beijing.

With a market cap of around $140.6 billion, Facebook trades at 30X expected 2015 earnings. And it has one of the lowest P/E ratios in the social networking group. LinkedIn trades at roughly 60X expected 2015 earnings. Yelp has a 145 price to 2015 earnings multiple. Twitter trades at nearly 182X estimated 2015 earnings.

My god it's raining momo's!! LOL it's a bloodbath out there. Remember, short $iwm and long $bp!!!! $fb $twtr $goog $nflx $pcln $qqq $spy

— Alejandro (@ElevatedTrading) Apr. 28 at 01:26 PM

Talk of a tech bubble has grown in recent weeks. Greenlight Capital’s David Einhorn told the Wall Street Journal last week that tech was in its second bubble in fifteen years. He said he had shorted a bunch of “momentum stocks.”

On StockTwits.com, the word “short” is increasingly seen in the streams of social networking companies.

$SPY Been busy this morning here is update re-shorted at $187.50 Shorted $LNKD based on breakdown at $152 shorted $FB after I covered at $57

— Mark Cunningham (@adventure2010) Apr. 28 at 12:08 PM


$FB nice short shaping up.

— Anshul mittal (@Headcrabz) Apr. 28 at 01:55 PM

Sentiment on LinkedIn stands at 51% bearish, according to StockTwits’ analytics.
However sentiment on Facebook, $FB, and Twitter, $TWTR, is overwhelmingly bullish.

$FB Blood in the streets but long term FB is rated G for growth. A roller coaster to $80.00. Buy a ticket if you can handle the ride.

— David Morel (@TSAM1976) Apr. 28 at 01:30 PM

Some investors say Twitter’s earnings, tomorrow after the bell, is bound to change the minds of bearish investors. Analysts expect the company to report a loss of $0.03 on $241.47 million in sales, according to stats on Yahoo Finance.

However, many investors argue that the tide has turned against these companies. And even earnings beats will not help them.

$TWTR $LNKD $YELP Q1 on Tap: Beats Expected but Stocks in Meltdown Mode
http://stks.co/e0UF9 Tiernan Ray

— michael dell (@ronin245) Apr. 28 at 01:18 PM


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