LinkedIn Earnings Higher Than Expected, But Outlook Grim
LinkedIn Corp. (NYSE:LNKD) reported its earnings on Tuesday following the closing bell. The report beat the expectations of many analysts and investors, but there was a sharp decline in share price in trading today.
Gene Munster’s Take
Senior analyst Gene Munster of Piper Jaffray offered his opinion of the company saying that LinkedIn Corp. (NYSE:LNKD) has a high valuation. He also noted that there is very little competition in the company’s niche of social networking for professionals.
“It’s the unchallenged leader in a $27 billion market, in terms of the overall social market in the recruiting market, and it’s $1.5 billion revenue business today,” said Munster.
The company is trading at close to 158 times the projected forward earnings. In comparison Facebook Inc. (NASDAQ:FB) is trading at 70 times its forward earnings, and Google Inc. (NASDAQ:GOOG) is trading at only 23 times its projected earnings. This has raised the question of whether the social network can continue its growth trend and maintain its pace.
According to LinkedIn, the network added to its user base in the last quarter and now reports there are 259 million active users. This is a 38 percent increase from the numbers reported just a year ago.
LinkedIn Corp. reported a third quarter net loss of $3.4 million, which is higher than the $2.3 million it posted last year in the same quarter.
The report also stated that aside from expenses the company earned $46.8 million dollars. In comparison, last year’s third quarter produced only $25.1 million. This means that LinkedIn earned investors a total of $0.39 per share last quarter, versus the $0.22 cents per share last year.
Overall revenue was also boosted this past quarter to $393 million. This was a 56 percent gain on the $252 million reported last year.
Analysts’ Estimates Overshot
According to Thomson Reuters consensus among analysts on the street was that LinkedIn Corp. (NYSE:LNKD) would report earnings of $0.32 per share on overall revenue of $385 million. The actual numbers posted surpassed expectations and left investors with a little more change in their pockets than anticipated.
LinkeIn executives posted a grim outlook for the fourth quarter, despite topping estimates for the third quarter. The official guidance calls for revenue in the $415 million to $420 million range, while analysts had estimated revenue of $438 million.
Gene Munster insists that investors must look past the low figures in the guidance, saying LinkedIn is “going to radically change recruitment over the next decade and that’s why you’ve got to look beyond this guidance.”
The stock dropped sharply in trading today, and is currently trading at $223.86 per share, down $23.28 from its opening price this morning.
Disclosure: The author has no position in the stocks mentioned in this article, and does not intend to initiate any position in the next 48 hours.
Become An Exclusive Member Of Wall Street Insanity