NEW YORK (TheStreet) -- 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 2 p.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).
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.
At its intraday market cap of $140.6 billion, Facebook trades at 30 times expected 2015 earnings. And it has one of the lowest price-to-earnings ratios in the social networking group. LinkedIn trades at roughly 60 times expected 2015 earnings. Yelp has a price-to-2015-earnings multiple of 145. Twitter trades at nearly 182 times estimated 2015 earnings.
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.
$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 and Twitter is overwhelmingly bullish.