LinkedIn Gives Tepid Outlook; Shares Tumble
February 05 2016 - 3:03AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/5/16)
By Deepa Seetharaman
Shares of LinkedIn Corp. fell 29% after the professional online
network posted a fourth-quarter loss and forecast a much
weaker-than-expected 2016 as it shifts gears on its advertising
strategy.
The tepid outlook reflected a slowdown in its higher-margin
online sales business, economic pressure overseas and its decision
to shelve an advertising product launched last year, executives and
analysts said.
Chief Executive Jeff Weiner told analysts that LinkedIn would
increasingly narrow its focus to "high-value, high-impact
initiatives" in 2016. Chief among those are content sponsored by
advertisers that appear in LinkedIn users' feeds. The "sponsored
updates" ad product is LinkedIn's fastest-growing and most
profitable.
For the first quarter of 2016, the company forecast revenue of
$820 million and earnings per share, excluding certain expenses, of
55 cents. Analysts had been expecting revenue of $867 million and
earnings on the same basis of 74 cents a share, according to
Thomson Reuters.
For the year, LinkedIn said it expects revenue of $3.6 billion
to $3.65 billion and earnings excluding expenses of $3.05 to $3.20
a share. That is significantly below expectations of $3.91 billion
in revenue and adjusted earnings of $3.67 a share.
LinkedIn shares fell after-hours to $137.11, their lowest level
since February 2013, and nearly 50% below their all-time high in
February 2015. The after-hours drop wiped out about $7 billion in
market value.
The weak forecast overshadowed an otherwise strong
fourth-quarter report. LinkedIn hit 414 million members in the
fourth quarter.
The company posted a loss of $8.4 million, or 6 cents a share,
for the last three months of 2015. A year earlier, the company eked
out a profit of $3 million, or 2 cents a share.
Excluding certain expenses, LinkedIn said it would have earned
94 cents a share, according to Thomson Reuters. That was
significantly better than the 74 cents a share the company
projected for the quarter, on the same basis.
Revenue of $861.9 million, up 34%, topped analysts' projections
of $857.6 million.
Costs rose, too, as LinkedIn spent more to develop products,
overhaul its mobile app and expand its sales force. In the fourth
quarter, product-development spending jumped to $217.3 million from
$150.3 million in the year-earlier quarter.
LinkedIn said it was discontinuing Lead Accelerator, an
advertising tool it introduced last year that helped customers
re-target visitors to their website. Executives said Lead
Accelerator, the product of a 2014 acquisition, required more
resources than expected to grow.
Prospects are brighter for native advertising, Mr. Weiner told
analysts Thursday. Revenue from sponsored updates more than doubled
in 2015.
(END) Dow Jones Newswires
February 05, 2016 02:48 ET (07:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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