Today: Twitter shares take a roller-coaster ride, end up falling another 5 percent and shaving nearly $7 billion from the company's market cap in two days of trading.
Honeymoon appears over for Twitter
Twitter shares continued their plunge from record highs Monday, closing down 5 percent, or $3.24, to $60.51 after a roller-coaster day of trading. After falling 13 percent Friday, shares fell as much as 7 percent Monday morning before an afternoon rally recovered almost all of that, then plummeted again before the closing bell. The two-day losses have shaved off nearly $7 billion in market capitalization for the San Francisco-based microblogging company.
The drop appears to signal the end of Twitter's honeymoon on Wall Street. Shares had soared as much as 145 percent from its $26-a-share IPO price in November. Many analysts called Twitter's stock vastly overvalued, as its recent gains far exceeded experts' price targets.
Twitter's about-face has been swift: Last Thursday, Twitter surged almost 5 percent to a mid-day high of $74.73, and closed at a record $73.31. That left shares up nearly 80 percent in December, and almost triple its IPO price. Reality set in Friday, when Macquarie analyst Ben Schachter downgraded Twitter from neutral to sell, triggering the plunge. "We continue to believe that Twitter as a company has a bright future and many opportunities ahead," he said in the report, according to Bloomberg News. "However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation."
S&P Capital IQ analyst Scott Kessler told the Merc's Peter Delevett last week that three factors had been driving Twitter's surge: user passion, a limited number of shares and an overall bull market. Twitter has yet to make a profit, and analysts don't expect it to until 2015. Still, investors had been optimistic that targeted ads to Twitter's hundreds of millions of users would be a huge revenue-generator in the future.
In other news, a new report found Twitter has been surpassed by Pinterest in overall popularity in the United States. A survey from the Pew Research Center found 18 percent of U.S. adults online use Twitter, compared to 21 percent who use Pinterest. Facebook remained, by far, the most popular social network, with 71 percent of adults using it; business-networking site LinkedIn was No. 2, at 22 percent. The survey found unique demographic profiles as well: Pinterest was found to be four times more popular with women than men; LinkedIn is most popular among college graduates and richer households; and Twitter is most popular among young, urban dwellers and racial minorities.
Markets quiet as year comes to an end
The markets barely moved Monday, as investors appeared to be satisfied with this year's gains as 2013 wound down. The Dow Jones industrial average was the only index to post gains -- up 0.16 percent. The tech-heavy Nasdaq and widely traded Standard & Poor's 500 closed down 0.06 and 0.02 percent, respectively, while the Silicon Valley 150 index fared the worst, down 0.26 percent.
For the year, the Nasdaq has gained nearly 38 percent, the S&P 500 is up 29 percent and the Dow is up almost 26 percent.
"We certainly have had quite an impressive year, and obviously, a lot of that was helped by the central bank stimulus. Given what we've seen so far, the path of least resistance has been to go higher," Ryan Larson, head of equity trading at RBC Global Asset Management, told Reuters.
Trading was light Monday; the stock markets have a half day Tuesday, and will close Wednesday for New Year's. "I wish I had extended my vacation, is the only thing going through my head because volume is just anemic," trader Sam Ginzburg told Reuters.
San Jose-based solar company Sunpower rose $1.31, or 4.53 percent, to $30.22, as a new study found Americans are being more energy-efficient and using the least amount of electricity in more than a decade. After falling 3.6 percent Friday, Oakland-based Internet radio leader Pandora fell another 3.87 percent, or $1.07, to $26.59, following a court ruling last week that threatens some of its music licensing deals effective Jan. 1.
Elsewhere Monday, Menlo Park's Facebook fell 3.12 percent, or $1.73, to $53.71, despite increasing its lead as America's most popular social network. San Francisco-based Zynga declined 1.77 percent, Cupertino tech giant Apple dropped 0.99 percent, and Mountain View-based Internet leader Google dipped 0.80 percent. Silicon Valey hardware companies fared better in general, with Cisco, Juniper, VMware, Oracle and Intel all posting slight gains.
Up: Oracle, Intel, Cisco, Gilead, VMware, Juniper, Tesla, Sunpower
Down: Apple, Google, HP, eBay, Yahoo, Netflix, Facebook, Zynga, LinkedIn, Twitter
The SV150 index of Silicon Valley's largest tech companies: Down 3.94, or 0.26 percent, to 1,495.17
The tech-heavy Nasdaq composite index: Down 2.4, or 0.06 percent, to 4,154.20
The blue chip Dow Jones industrial average: Up 25.88, or 0.16 percent, to 16,504.29
And the widely watched Standard & Poor's 500 index: Down 0.33, or 0.02 percent, to 1,841.07
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Follow Mike Murphy at Twitter.com/mmmmurf.