Why Amazon.com, Netflix, and Facebook Are Today’s 3 Worst Stocks

Growth stocks sell off into the weekend as Ukraine fears mount and the market loses momentum.

Apr 25, 2014 at 7:37PM

Underwhelming quarterly earnings numbers and rising tensions between Ukraine and Russia sent stocks spiraling lower on Friday. High-growth stocks in the Nasdaq Composite Index bore the brunt of the pain, as investors fled to safer investments like utilities and treasuries. Amazon.com (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Facebook (NASDAQ:FB) each finished toward the bottom of the S&P 500 Index (SNPINDEX:^GSPC) today. The S&P 500 itself fell 15 points, or 0.8%, to end at 1,863. 

Amazonfiretvtheavengersfeature Performance

Amazon's investing a fortune in its set-top box, to investors' dismay. Source: Amazon website

Amazon.com finished as the most miserable performer in the entire index, plunging 9.9%, even after beating both sales and income expectations in the most recent quarter. It seems ridiculous to punish a stock for topping Wall Street estimates, and indeed, that logic would be absurd. The truth is that investors are worried about Amazon's compulsion to spend endlessly on expanding its business; the e-commerce giant actually projected an operating loss in the second quarter as it ramps up spending on its Fire TV set-top box and logistics services. 

Another Nasdaq component and household-name momentum stock, Netflix, shed 6.4% today. Like Amazon, Netflix is generously valued, trading at 174 times earnings. Amazon, in all its ambition and without regard to its profit margins, is aggressively expanding into Netflix's video-streaming business, as this week's unprecedented deal with HBO plainly reveals. While this deal looks like a direct threat to Netflix on the surface, my colleague Sam Mattera makes the compelling argument that Netflix and Amazon Prime are becoming so differentiated that they function as complementary services every true cord-cutter should have.

Finally, Facebook also ended as a victim of the high-growth sell-off Friday. Shares fell 5.2%, just a day after the social media behemoth reported a blowout quarter. Revenue in the first quarter rocketed 72% higher to $2.5 billion, while earnings per share in the period nearly tripled from $0.12 to $0.34. Though both results easily topped expectations, Wall Street was unimpressed with the monetization of some of Facebook's more recent acquisitions, i.e. Instagram. I'm afraid investors should get used to Facebook's recent ambitious acquisitions not paying for themselves immediately; while Instagram cost a cool $1 billion, the $19 billion WhatsApp acquisition probably won't turn profitable anytime soon.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com, Facebook, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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