The partial government shutdown in the U.S. is having a detrimental effect on the stock market and social media stocks like Facebook Inc. (FB - Analyst Report), LinkedIn Corp. (LNKD - Analyst Report) and Yelp Inc. (YELP - Snapshot Report) have not been spared either.
The social media sector is feeling the heat, although it has sailed through the economic uncertainty in the U.S. in the past. The sector has been immune to a considerable extent to political problems and the worsening debt situation in the country. However, economic uncertainties have been continuing for a while now and social media, which is funded by advertising budgets, is now seeing the impact as well.
Different economic and news reports don’t paint a very rosy picture. The Institute of Supply Management findings suggest that sales dipped sharply, along with new orders, and hiring reduced at U.S. service companies. The report covers industries such as retail, construction, health care and financial services. Moreover, the U.S. Treasury Department also shared a similar view, and said that the economy is in for a downturn and the economic situation could worsen more than the previous recession if debt obligations are not dealt with properly.
The key social media ETF, Global X Social Media Index ETF has seen a 3% decline in priceto $19.23. The 52-week range for this ETF lies between $11.81 and $20.50. The downward movement in prices indicates the impact of the gridlock on the social media segment..
The impact is also felt on individual share prices: Over the week ending Oct 8, Facebook was down 6.5% to $47.14, whereas LinkedIn was down 11.3% to $222.7. Moreover, Yelp was down more than 9.2% to $63.6, and Groupon Inc.(GRPN - Analyst Report) 10.0% to $10.53.
Facebook Inc. and Yelp Inc. have a Zacks Rank #2 (Buy), while LinkedIn has a Zacks Rank #3 (Hold).