Social-Media Stocks Make Waves As Yellen Announces More of the Same

Janet Yellen impresses Wall Street as she testifies in front of a congressional hearing for the first time as Fed chair.

Feb 11, 2014 at 10:00PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Today, Wall Street got to meet Janet Yellen -- and by all accounts, Wall Street loved her. The new Federal Reserve chairwoman addressed a Congressional committee regarding the central bank's plans under her leadership -- and for the most part, it appears that she'll continue the policies of her predecessor, Ben Bernanke. Tapering will continue, and interest rates will remain low until the job market improves. 

All the major indexes increased by more than 1% today. But Yellen wasn't the only one making news. Social-media stocks lit things up, as Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) both increased by more than 2%, while LinkedIn (NYSE:LNKD) dropped by more than 2%.

So what happened? For Facebook, the increase came as two Sterne Agee analysts maintained their "buy" rating and $70 price target on the stock. Their earnings estimates of $1.32 per share for 2014 and $1.70 for 2015 are higher than the consensus, and that's a clear sign that they don't think Facebook will suffer from the loss of younger users. Meanwhile, eMarketer estimates that 95.9% of social networkers in the 12-to-17 age bracket are on Facebook. That's higher than expected, and it would mean the number of teen users essentially has nowhere to go but down. Investors should keep an eye on these trends in the quarters to come and see whether they affect Facebook's business to any significant degree.  

As for Twitter, a report came out today that the company is testing a new profile look that more closely resembles the layouts at Facebook and Google's social network, Google+. Back when Twitter reported earnings, management conceded that new user growth may have been affected by the difficulty some people were having navigating with Twitter's platform. A redesign shouldn't hurt the company, as most users will probably roll with the changes and new users may be more inclined to give Twitter a chance if they're given a platform that feels more familiar.

Finally, shares of LinkedIn dropped 2.18% on very little news but more than double the normal trading volume -- more than 5 million shares, compared with an average of 2.2 million over the past three months. Shares fell more than 6% in reaction to Friday's earnings report, which delivered weaker guidance than expected, and today's drop may be more of the same, as investors continue to weight the numbers. Of course, long-term investors who believe in the future of this industry in general, and LinkedIn in particular, should simply ride out this short-term bump and keep on holding.

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Matt Thalman owns shares of Facebook. The Motley Fool recommends Facebook, LinkedIn, and Twitter and owns shares of Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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