LinkedIn joins Twitter in Q1 post-earnings tumble

NEW YORK - The Associated Press

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Dumping social media stocks that show any sign of weakness is trending on Wall Street.

Shares of LinkedIn Corp. plunged 21 percent in after-hours trading on April 29 after the professional networking service gave a disappointing outlook for the second quarter, weighed in large part by its pending purchase of online learning company Lynda.com.

Twitter, meanwhile, has lost 23 percent of its value this week through April 29. The messaging service on Tuesday reported revenue and offered an outlook that fell short of Wall Street’s expectation. On top of that, investors were rattled when Twitter’s earnings report came out inadvertently nearly an hour ahead of schedule.

The sharp declines came amid a particularly bad stretch for the tech-heavy Nasdaq, which was down some 3 percent this week, on pace for its worst week this year. Tech darling Apple seems to be the biggest culprit for the drop. Its shares fell 2.7 percent on Thursday and are down nearly 4 percent for the week.

Not even Facebook seems immune to the sell-off, even with last week’s solid earnings report behind it. Its shares are down 3.4 percent for the week, although they are up about 1 percent for the year.

The double-digit stock declines at Twitter and LinkedIn show that investors have little patience for weakness in highly valued social media stocks. Twitter attributed its revenue shortfall to weaker-than-expected contributions from some of its newer advertising products. The shortfall came at a time investors were looking for stronger advertising growth to make up for less-than-stellar user numbers. Without either, investor confidence was shaken.

Sterne Agee analyst Arvind Bhatia said he wasn’t surprised that Wall Street reacted severely, given Twitter’s high share price valuation and - at least until this week - its strong performance this year. LinkedIn, whose high-flying stock has been battered for far less than Thursday’s weak outlook, gave investors a rare negative surprise.