Ahead of the Tape: LinkedIn Worth Another Look -- WSJ
April 28 2016 - 3:02AM
Dow Jones News
By Steven Russolillo
After its latest earnings report, LinkedIn Corp.'s stock ended
up like a job candidate's résumé with dumb spelling mistakes: in
the trash. Three months later and still begging for an interview,
investors should fish it out.
In February, the social network of the professional world,
forecast a much weaker 2016 than expected thanks to a slowdown in
its higher-margin online sales business. The stock tanked 44%, its
worst one-day drop ever. It hasn't come close to recovering.
LinkedIn now sees revenue growing 20% to 22% this year, down
from 35% in 2015. Yet even in that slower-growth mode, the stock's
selloff looks overdone. Overly sour sentiment heading into its
first-quarter earnings report Thursday should provide brave
investors an opportunity.
Analysts polled by FactSet estimate earnings of 60 cents a
share, up just 5% from a year ago. In January, this was expected to
be 75 cents. Revenue is expected to have grown by 30% to $828
million.
Frequently, LinkedIn unfairly gets lumped in with other
social-media companies and young, highflying technology firms. Yet
its hybrid consumer and enterprise business model is far more
sustainable and diversified than others with uncertain business
underpinnings. As a portal of online résumés, LinkedIn has
fundamentally changed how people search for jobs and how employers
find candidates.
Granted, that also explains why February's report was so
surprising and why the stock's reaction was so severe. Since its
initial public offering nearly five years ago, LinkedIn has
exceeded earnings and revenue expectations in each of its quarterly
reports. This consistency helped justify a particularly rich
valuation. In hindsight, that left little room for error.
LinkedIn is no stranger to volatility. Its stock has had
double-digit percentage swings after each of the past seven
quarterly reports. But now, LinkedIn has a lower bar to hurdle and
a more reasonable multiple.
Its shares fetch 35 times projected earnings over the next 12
months, near its cheapest as a public company and a far cry from
the 80 times it has averaged over the past three years.
With the stock at less than half of last year's record,
investors might want to log in again.
Write to Steven Russolillo at steven.russolillo@wsj.com
(END) Dow Jones Newswires
April 28, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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