Today: Silicon Valley tech stocks end week with a bloodbath, as Pandora tanks after earnings and social media and cloud software companies plunge.
Tech downfall resumes on Wall Street as Silicon Valley stocks plunge
Just as Silicon Valley companies' descent had seemed to ease amid a crush of strong earnings reports, the bear market roared again Friday, sending the Nasdaq and SV150 indexes tumbling.
"The great earnings surprises from some of the big tech stocks haven't quite been enough to bring down the wall of worry," Tom Stringfellow, president and chief investment officer of Frost Investment Advisors, told Bloomberg News.
The theme for recent stark declines in Silicon Valley has been the turnaround of "momentum" stocks, companies that flew high in 2013 on enthusiasm for their future prospects. That trend continued Friday, with formerly popular targets like social-media stocks and cloud-software companies plummeting.
The valley's biggest loser in Friday trading was one of the companies that experienced massive gains in 2013, Pandora Media, which declined 16.6 percent to $23.51, its largest single-day decline in more than a year and lowest closing price since September.
The Oakland streaming-audio company announced earnings Thursday afternoon, and managed to beat expectations with a year-over-year sales gain of nearly 70 percent. The company's projections for current quarter and full-year performance underwhelmed investors and analysts, however, as Pandora said it would continue plowing its growing revenue stream into marketing, with a possible international expansion on the horizon.
"Our investment curve is higher than the Street expected," Chief Financial Officer Michael Herring told Bloomberg. "It is a lot of work to provide the best music service available."
Even while investors pushed Pandora's market cap lower than $5 billion, analysts were split on the company's prospects. Aaron Pressman pointed out that 20 analysts covering the company suggest buying the stock, while only two have a "sell" rating or equivalent. Credit Suisse analyst Stephen Ju wrote Friday that he is "optimistic on (Pandora's) runway for growth," while Albert Fried analyst Rich Tullo wrote, "We still think Pandora faces a significant growth rate decline and we think investors need to depart the bus and seek alternate modes of transportation."
Another company that makes its money from streaming content to customers over the Internet and had a big 2013 on Wall Street, Netflix, also plunged Friday. The Los Gatos video-on-demand company dropped 6.4 percent to $322.08, giving away all the gains realized after its earnings report earlier this week and falling to its lowest closing price since October.
While streaming media faced doubts, the exit from social media was more widespread. Facebook's earnings report released earlier this week was roundly praised by analysts, but the world's largest social network dropped 5.2 percent to $57.71 Friday, its lowest closing price since January. That performance actually seems tame compared with other social-networking stocks: LinkedIn declined 7.8 percent to $158.17, Twitter dropped 7.2 percent to $41.61, Yelp lost 8.1 percent to $57.63, and Zynga moved 6.2 percent lower to $4.08.
Enterprise cloud software's stature as a darling of Wall Street also took a big hit Friday. Software-as-a-service pioneer Salesforce declined 3.5 percent to $52.80, its lowest closing price of 2014, and newer offerings in the sector suffered more: Workday fell 6.9 percent to $67.61, WageWorks fell 8.2 percent to $41.30, ProofPoint plummeted 8.9 percent to $25.42, and Netsuite gave up 4.9 percent to close at $77.03.
Other companies were not immune to Friday's fall. Google declined 2.1 percent to $523.10 after reportedly receiving a bill for $1.38 billion in French back taxes while picking up some patents from FoxConn. Tesla Motors declined 3.9 percent to fall back below $200 at $199.85 as CEO Elon Musk announced that his SoCal company, SpaceX, plans to sue the federal government for failing to qualify the company for defense contracts. Yahoo fell 2.2 percent to $24.48 amid reports that Alibaba's IPO will break world records, and eBay declined 2 percent to $53.72 after insider trading charges involving a 2011 acquisition by the San Jose e-commerce company.
Only 14 of the SV150 companies clocked an advance Friday on Wall Street. Apple managed a gain, adding to Thursday's rewards with a 0.7 percent increase to $571.94 as an appeals court decision in Apple's patent suit against Motorola caused consternation in its ongoing San Jose court showdown with Samsung. SunPower roared 6.8 percent higher, the strongest percentage gain in the SV150, after announcing strong earnings and boosting its 2014 projections.
Up: SunPower, Intuit, Apple, Electronic Arts
Down: Pandora, Yelp, LinkedIn, Twitter, Workday, Netflix, Zynga, AMD, Facebook, SolarCity, Applied Materials, Tesla, VMware, Salesforce, Juniper, Nvidia, Adobe, Yahoo, Google, eBay, Intel, NetApp
The SV150 index of Silicon Valley's largest tech companies: Down 22.7, or 1.63 percent, to 1,373.14
The tech-heavy Nasdaq composite index: Down 72.78, or 1.75 percent, to 4,075.56
The blue chip Dow Jones industrial average: Down 140.19, or 0.85 percent, to 16,361.46
And the widely watched Standard & Poor's 500 index: Down 15.21, or 0.81 percent, to 1,863.4
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. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.