Another bubble indicator for LINKEDIN
Today i would like to take another metric that consolidate my point and that metric is the Company value (mkt cap) vs the value per user.
At the current prices Linkedin has a market price of 19.5 billion dollars. In the last financial report the company says that they have 200 million users.
That means that at the current prices every linkedin user is worth something like 97.5 usd... and that is just ridiculous!
Im a member of linkedin, in fact all of my friends, family and co-workers are members and we have never pay a cent to this company neither we have any plans to pay in the future--- so a valuation of 97.5 usd per user?? are you serious?
Now we get back to reality with 200 millions users and with 972 millions of income, how much money is really getting Linkedin out of members??
Linkedin has 3 revenue drivers: Talent, Marketing solutions and subscriptions. Lets forget about these 3 drivers and lets focus on the users and what really 200 millions members are worth in terms of income.
If we have 200 millions members and we have an income of 957 millions that means that means that every user adds 4.86 usd in revenue. But the crazy people that is buying this bubble now is willing to pay the ridiculous number of 97.5 dollars per user. Do you really think that in the future they will make that money? i don't think so.
Lets see how much facebook pay per user of Instagram.
FB pay something like 33 usd per user for instagram and the market think that was a crazy number, so imagine 3 times that number and you have Linkedin.
Another example was Facebook when the wizards of wall street say that the company was worth 100 billions dollars (another bubble).... at that price FB has a value per user of 100 usd---- and so what happened??
The Facebook bubble pop an today the company have a market cap of 63 billions losing something like 37% of the value and i think it will continue to fall.
At today prices a Facebook user is worth something like 60 usd and getting lower every day as people realize that this values doesn't make any sense and i think that linkedin will have the same fate.
The arguments are the same, growth, growth, growth.. but it really doesn't matter how impressive is this company growth because at this prices they have already discount something like 5 years of 50% growth and is still not cheap.
You have to ask yourself.. Why are the insiders selling like crazy?
But all bubbles have a way of bursting or being deflated in the end.