Janet Yellen thinks social media stocks are overvalued. Is she right?


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By James Dennin for Kapitall.

This morning the Federal Reserve officially revealed their concerns about valuations in the stock market, saying that stocks in social media and biotech appeared " substantially stressed ." 

Federal Reserve Chair Janet Yellen prompted a selloff with her announcement. Stocks like Facebook ( FB ) and Salesforce ( CRM ) fell 1.5% or more. 

This is, in fact, the second time this year a Fed official has triggered sell-offs by citing stressed valuations, prompting some analysts to say these statements are part of a strategy to cool off markets. 

Michael Block in an interview with  Barron's calls it the "selective valuation call out strategy." Instead of controlling prices with cumbersome new monetary policy, the Fed has been using "call outs" to pull the levers instead. 

This creates an extremely frustrating environment for biotech or social media investors who will see their stocks hammered every time the Fed gets concerned about a correction.  

Will Janet Yellen's new "call out strategy," if a reality, help the Fed stabilize the stock market? Or could it cause more harm than good? Use the list below to begin your analysis and let us know what you think in the comments.  

Click on the interactive chart to view data over time. 

1. Facebook, Inc. ( FB , Earnings , Analysts , Financials ): Facebook, Inc. operates as a social networking company worldwide. It provides a set of development tools and application programming interfaces that enable developers to integrate with Facebook to create mobile and Web applications. Market cap at $173.98B, most recent closing price at $70.78.

2. LinkedIn Corporation ( LNKD , Earnings , Analysts , Financials ): Operates an online professional network. Market cap at $23.93B, most recent closing price at $199.59.

3. Sina Corp. ( SINA , Earnings , Analysts , Financials ): Provides online media and mobile value-added services (MVAS) in the People's Republic of China. Market cap at $5.09B, most recent closing price at $76.08.

4. Pandora Media, Inc. ( P , Earnings , Analysts , Financials ): Operates as an Internet radio company in the United States. Market cap at $6.88B, most recent closing price at $37.26.

5. Twitter, Inc. ( TWTR , Earnings , Analysts , Financials ): Twitter, Inc. is a global platform for public self-expression and conversation in real time. Market cap at $20.23B, most recent closing price at $55.78.

(List compiled by James Dennin. Monthly returns sourced from Zacks Investment Research, all other data sourced from Finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
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