Please ensure Javascript is enabled for purposes of website accessibility

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

By Matt Thalman – Feb 11, 2014 at 10:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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

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 (META 0.62%) and Twitter (TWTR) both increased by more than 2%, while LinkedIn (LNKD.DL) 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.

Matt Thalman owns shares of Facebook. The Motley Fool recommends Facebook, LinkedIn, and Twitter and owns shares of Facebook and LinkedIn. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$109.46 (0.62%) $0.68
LinkedIn Corporation Stock Quote
LinkedIn Corporation
LNKD.DL
Twitter Stock Quote
Twitter
TWTR
Alphabet (A shares) Stock Quote
Alphabet (A shares)
GOOGL
$95.19 (-0.90%) $0.86

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
351%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.