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LinkedIn drags down its fellow momentum monsters

Nicole Sinclair
·Markets Correspondent

Driving the momentum tech names down significantly on Friday are two key stocks: LinkedIn (LNKD), which fell more than 40% after its fourth quarter report, and Tableau (DATA), off a staggering 50%.

The sell-off in the broader cloud-oriented names on Friday is significant: Salesforce.com (CRM) sold off 13%, Workday (WDAY) down 16%, and ServiceNow (NOW) off 11%.

While LinkedIn and Tableau issued guidance meaningfully below the street, the significant drop in shares for both stocks reflects a shift away from momentum-oriented stocks and lack of willingness to pay up for growth in a more uncertain and volatile macro environment.

Going into the quarter, LinkedIn 2016 EPS estimates stood at $3.70, according to FactSet, giving the stock a steep 52x multiple going into the quarter. For Tableau, EPS estimates stood at $0.62, according to FactSet, putting the forward P/E at 130x into the quarter. Even after the sell-off, valuation remains high at 35x and 100x for LinkedIn and Tableau, respectively.

Bessemer Venture Partners offers an interesting take on the outsized performance of cloud-oriented stocks over the last five years relative to the major indices, and especially the recent fall-off in the group.

The decline in cloud-based names on Friday also reflects a broader trend that has played out in the early days of 2016 for high-multiple technology names. Declines have been marked for the likes of Facebook (FB), Amazon.com (AMZN), Netflix (NFLX), Alphabet (GOOGL), Alibaba (BABA), Expedia (EXPE), and LinkedIn (LNKD). These momentum names have been grouped-- based on their high multiples--into two popular acronyms-- "FANG" (for FB, AMZN, NFLX and GOOGL) and "BAGEL" (for BABA, AMZN, GOOGL, EXPE and LNKD).

After outperforming in 2015, these stocks have seen outsized pressure downward in 2016, as Yahoo Finance's Aaron Pressman has highlighted.

Even Facebook and Alphabet, which both reported blow-out quarters, are down 1% and 9% for the year. Meanwhile Amazon is down 25%, Netflix is off 27%, Alibaba is odwn 22%, Expedia down 25%, and LinkedIn down 50%.

These "hope stocks" have proven that while they may not be as sensitive to the macro economy and have specific growth drivers, they are not immune to market sentiment and volatility.