Social media stocks have had a great run so far in 2013. In fact, the social media ETF (SOCL) has added 47% so far this year, including nearly 33% in the past six months.
However, recent trading in the space has been a whole lot choppier, as earnings season for the industry gets underway. Many companies in the space have posted lackluster guidance, or have just generally failed to impress investors with their numbers.
Plus, many companies were trading lower into the earnings season, leading to a slump for many of the top social media stocks. Consider how some of the biggest firms in the space have traded over the past 10 days (including the first part of today's session):
- Yelp (YELP) down 4.2%
- Facebook (FB) down 5.3%
- LinkedIn (LNKD) down 6.6%
- Groupon (GRPN) down 14.3%
- Zynga (ZNGA) down 2.8%
- Social Media ETF (SOCL) down 4.2%
This is pretty concerning, especially considering that the S&P 500 is up over 1.6% in the same time frame, but is it time to panic?
After all, ZNGA, FB, SOCL and YELP have Ranks of at least #2, while no security listed above has a Rank worse than #3. So at least on the earning estimate front, the space is looking quite well.
However, given the recent trading in the space and the slowdown in growth projections in many names, can these positive ranks hold up? Many companies in the space are trading at sky-high valuations, so high growth will be needed to justify some of the multiples in the industry.
But what do you think? Is the run in social media over, or is this just a pause before the next leg higher?
Let us know in the comments section below!
Want more insights from Zacks? See our latest free report 5 Stocks to Double. Click here to receive this free report now >>>
Read the analyst report on FB
Read the analyst report on LNKD
Read the analyst report on SOCL
Read the analyst report on GRPN
Zacks Investment Research