Commentary

Global Rout Hits Social Media Stocks, Too

The falling tide sinks all boats, the converse of the old saying goes. As stock markets around the world swooned on Monday, social media stocks were hardly immune to the overall trend.

At the time of writing, Facebook’s stock price was down 4.1% from its opening price to $82.53, having recovered somewhat from an earlier dive to $75.60. The latest price also represents a 16% drop from its recent peak of $98.39 on July 21. The stock price began to slip after the company’s second quarter earnings report, which raised concerns about the social network’s moderating growth rate, but overall investors have been pleased by its strategy for monetizing its massive mobile audience -- so the drop may prove transient.

Twitter’s drop, on the other hand, is more worrying in light of preexisting concerns about its profitability and long-term growth prospects. On Monday morning the stock was trading at $24.89, down 3.8% from its opening price, and 32% off its recent peak of $36.54 on July 28. Most troubling for investors, Twitter is now trading below its IPO price of $26.

advertisement

advertisement

The drop began with Twitter’s second quarter earnings announcement, as top execs admitted that user growth was slowing sharply, in large part because many people find it difficult to use, with limited engaging content. Twitter has taken a number of steps to revamp and simplify the platform so it surfaces new and important content from across the network as soon as users log in, and is also searching for a new CEO. But in the short term these steps are unlikely to reassure investors, also concerned that Twitter has yet to turn a profit.

Smaller drops were seen at other social media stocks. Social review site Yelp was down 1.1% to $22.84, while rival social review site Angie’s List slipped 0.9% to $4.60.

To be fair to social media companies, other tech stocks also took their lumps on Monday. Amazon’s stock was down 3.5% to $477.50, Microsoft slipped 1% to $42.68, and Google was down 2.1% to $600.29 -- all recovered somewhat from steeper drops when trading began.

Next story loading loading..