Why Netflix, Alexion Pharmaceuticals, and Facebook Are Today's 3 Worst Stocks

Biotech stocks continue to plunge as regulation, competition, and valuation drive these three names into the ground.

Mar 24, 2014 at 7:58PM
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Eight in 10 sectors saw declines on Monday, as heavy selling among high-growth stocks and recent outperformers brought the broader market down as well. The biotech industry in particular fueled much of the pullback, and yet only one of today's three beleaguered names was in that business. Netflix (NASDAQ:NFLX), Alexion Pharmaceuticals (NASDAQ:ALXN), and Facebook (NASDAQ:FB) ended as the three worst stocks in the S&P 500 Index (SNPINDEX:^GSPC) on Monday. The S&P itself fell 9 points, or 0.5%, to end at 1,857.

Shares of Netflix plummeted, losing 6.7% today after a Sunday Wall Street Journal report shed light on what could be a monstrous competitive threat to the business. Apple and Comcast are in talks to partner on a set-top box that would stream live and on-demand content to consumers without the burden of slow connection speeds and subpar video quality, according to the report. Not only would this be a huge threat to Netflix, but it's a slap in the face from Comcast, too, which just agreed to facilitate consistently high quality streaming experiences for Netflix customers for an unreported annual fee.

 Alexion Pharmaceuticals, which fell 8% on Friday, tumbled another 6.3% today. Alexion is, at the moment, a one-trick pony: it only boasts one approved drug, Soliris, which treats a rare genetic blood disorder. But that's not news to investors; the news that's sending Alexion and the rest of the biotech industry into a tailspin broke late last week, when a hint of increased oversight in the area caused a sudden panic. Three congressmen are probing pricing practices at Gilead Sciences, and -- judging by the mini market meltdown in the industry afterwards -- overpriced treatments just might be systemic. There's reason for Alexion shareholders to be a little worried: Soliris costs around $550,000 in England, a price it was asked to justify earlier this month by British health care regulators.

Lastly, Facebook shares took a 4.7% hit on Monday, though the sudden drop wasn't precipitated by major developments, as was the case in the previous two stocks. Truthfully, Facebook shares could use a pullback: the company trades at more than 100 times trailing earnings, plus it just shelled out nearly $20 billion for a messaging app! Facebook stock has soared in the past year, tacking on about 150% as the company finally turned a profit. But with insane acquisitions like the WhatsApp deal, I doubt Facebook will generate mouthwatering returns for years to come. The social media titan shelled out 19 times more than it paid for Instagram for WhatsApp, valuing the company at about 1,000 times 2013 sales. The only stock I'm buying in this scenario is stock in WhatsApp's negotiators; well done, guys, go buy an island on Zuck.

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John Divine owns shares of Apple. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS @TMFDivine.

The Motley Fool recommends Apple, Facebook, Gilead Sciences, and Netflix and owns shares of Apple, Facebook, and Netflix. 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.

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