Although I can't say that I'm all that surprised given current market conditions. Read on to see what they said, and why they're still bullish on shares of the business-oriented social network.Įvan Niu, CFA: Wow. Why, then, did LinkedIn stock plummet 40% the following day? We asked three Motley Fool contributors for their thoughts on the stunning drop. We enter 2016 with increased focus on core initiatives that will help drive growth and scale across our portfolio. Q4 was a strong quarter for LinkedIn bringing to a close a successful year of growth an innovation against our long-term roadmap. Click here to check it out.When LinkedIn Corporation ( LNKD.DL) released fourth-quarter 2015 results late last week, the words of CEO Jeff Weiner seemed to contradict the market's swift negative reaction to the report. Warning! GuruFocus has detected 1 Warning Sign with LNKD. This article first appeared on GuruFocus. But it could be a long way back to the top.ĭisclosure: I have no position in any stock mentioned. LinkedIn has historically traded at higher P/S ratios when compared to the industry average, which means this valuation multiple shouldn't be a hindrance in the stock's efforts to climb.Īs for now, the stock appears set to trade at current levels for some time, at least until the company posts its first quarter of 2016 results. As such, the stock appears to be significantly expensive when compared to peers. LinkedIn currently trades at about 4.7x in P/S, which compares to the industry average of about 3.44x. This suggests that there could be some room downwards for the company's stock price. The company's guidance for non-GAAP EPS was also dwarfed by Wall Street expectations at $3.05 to $3.20 compared to $3.67 consensus. LinkedIn also issued a weak guidance of about $3.60 billion to $3.65 billion for fiscal 2016 revenue compared to analysts' estimates of about $3.91 billion. With that, perhaps investors would have had a different view. Had it maintained those levels in the recently concluded fiscal year, the company could have reported a much better net loss, perhaps just a small step from the previous figure of about $15 million. However, the company still expects to report positive non-GAAP EPS for 2016.īetween 20, the company increased its investment in R&D by an average of $100 million. There are those who believe that the stock is still expensively valued based on expected earnings growth. Will LinkedIn survive the current fall in stock price?Īfter falling by about 50%, many would wonder where the company's stock price goes from here. In 2015, the company invested $775 million in R&D, which is an increase of about $240 million from the amount invested in 2014.Īs such, it is quite clear that while net income has been hard to come by over the last few years, the company has been doing a great deal of investing in products that could lead to long-term growth. LinkedIn's net income may have slid to negative territories over the last two years, but part of this decline can be attributed to its increased investment in R&D. Employers and HR professionals spend a lot of money on training programs and workshops, and is well-equipped to handle that. However, this platform has a huge potential especially now that LinkedIn is weaving it into its talents business model. In this past fiscal year, generated $49 million in revenues. As such, LinkedIn will be maximizing the potential revenue from its leading business unit. LinkedIn looks to integrate to its talent solutions business model in a bid to address skill development for HR professionals and employers. In April, LinkedIn bought enterprise development platform for $1.5 billion. Based on these metrics, it is ideal to say that LinkedIn's primary business comes from hiring, and this is the unit that links employers with potential candidates. The company's talent solutions unit has two revenue streams including hiring, which brought in about $1.77 billion in revenues last year, while L&D (learning and development) garnered $107 million. LinkedIn collects most of its revenue from the Talent Solutions business unit, and in the most recent fiscal year, the company generated $1.877 billion from this unit, while the other two business units Marketing Solutions and Premium Solutions generated $581 million and $532 million. It is clear that as the company's revenue levels increased from one year to the next, the growth rate continued to drop. In 2013, the company's revenue grew by 57%, while in 2014 the rate dropped to 46%. Nonetheless, it is important to note that LinkedIn's revenue growth rate has been declining over the last few years compared to the 86% growth posted in 2012.
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