Buy And Sell Targets For 8 Social Media Companies

by: R.J. Chopin

Social media is in its infancy and already woven into the fabric of our lives. We connect on Facebook (NASDAQ:FB), game on Glu (NASDAQ:GLUU) by day, and Zynga (NASDAQ:ZNGA) by night. We dine out with Groupon (NASDAQ:GRPN), find recommendations on Yelp (NYSE:YELP), and upload pictures of great half price meals on our status. We exercise with Pandora (NYSE:P) and check LinkedIn (NYSE:LNKD) for business and employment opportunities. When the house needs repair we turn to Angie (NASDAQ:ANGI). We bank, buy, and pay bills on desktops, notebooks, tablets and smartphones. I could continue, but the point is made. Social media is here, and it's here to stay.

The challenge confronting investors is determining which companies to invest in and at what price. Most social media stocks were shamelessly hyped during the IPO courtship and then dumped on infatuated investors. Even savvy and seasoned investors like billionaire Marc Cuban could not escape the death spiral of Facebook, suffering a $200,000 loss before exiting the trade.

Social media stocks are beaten down to the place where they deserve another look. There are several names in this sector that are revolutionizing the social landscape and a few of them are starting to appear attractive. Let's take a closer look at some of these investment opportunities.

  • Facebook: Approaching 1 billion users worldwide, Facebook's IPO overpricing at $38 triggered such backlash that short selling pundits began calling for a $25, $13, and finally $7.50 per share target. Facebook has become the stock Wall Street loves to hate. Retaining 57% control of the company, can 28 year-old Zuckerberg take Facebook to the next level? I believe he can, but I think the $25-$26 range will be the downside on this one and we could see a retest before a return to $38. Targets: BUY $25, SELL $38

  • Groupon: Down from $31 to $7 and the lockout period passed, Groupon is oversold and looks attractive. But wait one minute. Groupon's CEO has done the unthinkable! According to Bloomberg, CEO Andrew Mason is working nights as a maitre d' for a Sushi restaurant. Mason's mission is to discover how Groupon can better serve its clients. Unfortunately, Mason's behavior has drawn serious criticism from Wall Street and the stock price is being punished. However, in a recent article on Groupon, I explained why a $15 target on Groupon is reasonable. I believe this is still possible, but thanks to the CEO it will be later, rather than sooner, before the share price recovers to this level. Targets: BUY $7, Sell $15.

  • Zynga: Wall Street's view of Zynga: If you don't have anything bad to report on Zynga, make it up. I think we may have seen the bottom on Zynga. Recently upgraded to "Outperform," trading 72% off its $15.91 high to $4.45, clearly oversold, no debt, 1 billion cash, a slew of new games coming; Zynga is a "Buy." With the recent addition of Yahoo's former founding executive, Ellen Siminoff, to the board of directors, we could see $8 before Christmas. Zynga remains the leading social game developer and a steal at this price. Targets: BUY $4.60, SELL $8.

  • Glu Mobile: Glu is the leading mobile game developer for tablets and smartphones. I bought this one on takeover rumors and future performance. In my last article on Glu Mobile, I explained why Glu might be a takeover target. Since then, Glu's CEO confirmed on CNBC's Fast Money that he is looking north of $11.50 as a fair acquisition price. Glu is trading around $5.50. I believe we could see a rise to $8 or $9 over the next 4 to 6 months. Targets: BUY $4.50, SELL $8.

  • Pandora: Pandora's Q1 report caused a 12% price jump. A 60% increase in Pandora's advertising revenue helped excite investors. JMP Securities raised their target to $16. Pandora is well off its $26 high and trading at $10.50. Pandora could retrace to the $9 or $8 range before moving higher. Longs have spread a takeover rumor on Pandora. Targets: BUY $9, SELL $14.

  • LinkedIn: A very powerful business model, but no reason to buy now. I would like to see if the company executes on earnings projections. A drop to $70 is possible on any negative news. Targets: None.

  • Yelp: Yelp is trading down from a lofty $31.96 high to around $24 and could easily slide down that slippery slope to $15 or $16 if the market turns south. The float is too thin at 16 million, making it an easy manipulation target. I don't think Yelp will turn a profit until late 2013. I like this long-term, but cheaper. Targets: BUY $15, SELL $25.

  • Angie's List: Angie is looking for revenue to double over the next 18 months, but according to earnings estimates, Angie will lose $0.98 this year and $0.40 in 2013. Angie fell from its $19.82 high to around $11.80 before bouncing higher. Targets: BUY $11, SELL $14.

Disclosure: I am long GLUU, ZNGA.

Disclaimer: The information herein is the exclusive opinion of the author and should not be used as a basis for investment decisions. Investors should do their own research before investing.