Thursday, March 17, 2011

Is the .com bubble re-inflating around social media? Part 2

This is part 2 of my analysis, of social media stocks, that are at the forefront of a new potential bubble forming in the stock market and the world economy. Here I'll cover companies with a much smaller market cap than part 1, companies that may have a LONG WAY TO GO, if the bubble really forms. Of course I make no promises of their potential, just a mathematical analysis of their state.

See part 1 here,

First up is Glu Mobile Inc. (GLUU), with a market cap of only  $150 million. Glu makes social media games designed for iPhones and other portable device platforms. They are in a potentially huge market, mixing video games, social interaction, and mobile devices.

GLUU (Red) NASDAQ (Blue)

The indicators show that GLUU may have already experienced a bit of this bubble, and is currently in a correction phase. Its momentum is still strong however, and the pullback may have created a nice point to buy in.

Next is a Chinese company called The9 Limited (NCTY), a leader in online gaming. They also have a $150 million market cap and are primed to make a fortune with the young, tech-savvy, Chinese population.

NCTY (Red) Nasdaq (Blue)

Unfortunately NCTY has not been as impressive over the last two years, underperforming the NASDAQ by 50%. The momentum indicator showed a switch in mid 2009 however, and the price has turned around a bit since. Still, this stock is not a strong indicator of a bubble, for a company that should be riding the bull, at the very least.
Finally we come to Web Media Brands (WEBM), a media service company that mixes the online organizing of events, education, jobs, markets, and news. Through the use of blogs and other sources they seek to link communities across the internet.

With only a $50 million market cap, this small company has exploded over the last two years. The question you need to ask yourself is, "Is this a huge valuation for a worthless company, or a cheap valuation for a potentially limitless company?"

Only time will answer this and other questions. From the stocks I have looked at however, and the unreal valuations given to many of the private Facebooks and Groupons of the world, all indicators point to a bubble. So the time might be right, to keep an eye out for those new companies, the ones that could make billions, and make you millions.

    Troy Lau

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