Federal Reserve Chairwoman, Janet Yellen, talk in front of the Senate Banking Committee on Tuesday has caused a stir amid her claims that most of the mainstream technology and social media stocks are over stretched. The effect of her speech was quick, Facebook Inc (NASDAQ:FB) and salesforce.com, inc (NYSE:CRM) stocks fell 1.5% and Twitter Inc (NYSE:TWTR) came down by 0.6%. Many social media companies have recently published their quarterly reports and Yellen’s reaction was based on these reports.
Yellen said that Equity valuations of smaller firms as well as social media and biotechnology firms are stretched. Discussing this issue in a program on Bloomberg, Eileen Burbidge, partner at Passion Capital, said that Yellen’s stance was ill-rated and she made some sweeping statements in her speech. She thinks that not all companies and social media stocks are over rated and Yellen’ comments can cause a detrimental trend in the market for these companies.
This is the second time this year that any Federal Reserve official has triggered sell-offs by talking of stressed valuations and stretching. Experts are now saying that this can be a secret effort to cool off markets. The investors of biotech or social media stocks are highly frustrated on this statement by Yellen.
“I do think it was a bit of a stretch, for them to say that these valuations are over stretched. […] I think it was a sweeping generalization and I think it’s largely…sort of, ill guided,” said Burbidge.
Burbidge said that stocks like Facebook Inc (NASDAQ:FB) are really doing great in the market and saying that Social media stocks are over stretched is not right at all. She said that Facebook stocks are 22% up this year and up a 136% since one and a half year.