This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Social Media's Valuation Creates Rush for Exits

NEW YORK ( TheStreet) -- Amid growing trading volume and aggressiveness during Monday's trading session, investors in Facebook (FB - Get Report), Zynga (ZNGA - Get Report), and Groupon (GRPN - Get Report) liquidated holdings over heightened concerns about the sites' ability to monetize their assets.

Linkedin (LNKD - Get Report), which also fell during Monday's session, is the only equity in this group of four that's still showing a bullish trend. The remaining three have fallen precipitously since their respective IPOs.

LNKD Chart LNKD data by YCharts

After fully digesting the bargain basement liquidation of DIGG for a reported $16 million over the weekend, investors' risk appetite fell. The reported sale price was considerably lower than the $161 million valuation applied to the company only four years ago in 2008.

Groupon, Zynga and Linkedin began Monday trading advancing over Friday's finish, amid Facebook's gapping opening decline. Facebook was aggressively sold off in the first hour of trading and then languished until, again, in the last hour of trading, when the spike in volume outpaced that of the opening hour.

FB Chart FB data by YCharts

In the final 10 minutes of trading, nearly 2.5 million shares of Facebook changed hands. Facebook closed Monday's trading session near the lows of the day and down for the fifth straight session. (Read why I believe Amazon Isn't Worth Half its Current Price.)

Facebook has no clear support levels due to the relatively short period of time since its IPO, but $26.31 is the next area of technical support, a price level that has been tested only once. Facebook, Groupon and Zynga have failed to demonstrate an ability to sell more than their stocks.

The hope for Facebook almost immediately after becoming a public company is they will be able monetize mobile use. Investors should have focused on mobile immediately before the site went public, as well as the lofty valuation.


TheStreet's Eric Jackson provides another viewpoint on Yahoo and Facebook. (You need a Real Money Pro account to read it, but Jackson's analysis makes it worthwhile.)

Facebook investors face an uphill battle with mobile monetization. Facebook's price-to-earnings ratio is an eye popping 60. That means it will take 60 years of profits to pay for one share of stock.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
FB $79.74 0.98%
GRPN $8.13 -0.61%
LNKD $269.24 0.76%
ZNGA $2.33 1.30%
GOOG $571.00 2.30%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs