Facebook Inc (FB), Twitter Inc (TWTR): The Dot-com Bubble Of 2014
Michael Lombardi: A few days ago, I woke up to news that reminded me of the “Dot-com Boom” of the late 90s and early 2000.
I’m sure you remember those days—the days when any company with “.com” attached to it received a lot of attention….and a high stock price.
Investors bought these stocks without any concern for non-existent revenues; forget earnings.
These days, social media stocks (NASDAQ:SOCL) are the new “dot-com” wonders.
We recently heard that Facebook Inc (NYSE:FB) bought “WhatsApp,” an instant messaging application for smartphones, for $19.0 billion.
The valuation doesn’t make much sense; the company has only 50 employees, 460 million monthly users, and no clear business model.
Last year, we saw Twitter Inc (NYSE:TWTR) do an initial public offering (IPO).
On its very first day of trading, the stock price increased by more than 70%.
This company lost more money in 2013 than it did in 2012.
Twitter’s loss per share in 2013 amounted to $3.41 compared to a loss of $0.68 in 2012. (Source: Twitter, Inc., February 5, 2014.) But investors shouldn’t fear; in the last quarter of 2013, hedge funds got into the game and bought Twitter’s stock.
Dear reader, I’m not saying Facebook or Twitter is a sell.
What I am saying is that the behavior we see on the key stock indices, especially for social media stocks, is not sustainable.