Why Social Media Stocks Are Falling

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socialIt was a bad week to be a social media investor.

Social media may be what all the kids are up to, but it wasn?t what investors liked this week.

Three social media companies ? Twitter, Yelp, and Linkedin ? all reported underwhelming results that led to their stocks being clobbered this week, reports the New York Times.

Linkedin shares LNKD -18.61% fell 25%, Twitter 25% and Yelp YELP 0.94% 23%.

From the Times:

??? The performances illustrate the way investors are questioning whether social media companies can keep their growth rates vigorous enough to justify their valuations. The stocks of all three companies had traded at relatively high levels, reflecting Wall Street?s giddy projections. Yet all three shattered that perception in their own way. And while many of these stocks are often volatile, with investors on edge about the weak economy, interest rates and other issues, shareholders increasingly have little tolerance for the slightest misstep.

??? ?Based on where some of these stocks were trading, expectations were already very high and were priced for relative perfection,? said Colin Sebastian, a senior analyst for Robert W. Baird & Company. ?The reaction when companies don?t achieve great results can be fairly severe.?

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