LINKEDIN (LNKD) the next bubble to pop
At this right moment the shares of Linkedin (LNKD) are making new highs at 181 usd, looks like the herd is buying like the shares were about to run out.
Euphoria is on the air and the bubble keep growing at every minute.
At this prices the market cap of Linkedin is reaching the 20 billion valuation and the argument for this assessment is the business model and growth of the company.
In fact the growth of the company is impressive, but we have to get back to reality.... We are talking of a company under the 1 billion Revenue (972 millions) in revenues..Even if the company keep growing at 50% the shares will be a bubble for at least the next 5 years!!
Growing at 50% for the next 5 years means that in 2017 the company will have revenues of 7.3 billions and maybe at that time you can look at the company and talk of valuations of 20 billions.
At this price the company is trading at 20.58 times sales, if we look forward the company will be trading at 2.7 sales of 2017.So are you really willing to pay 20.5 times sales for a company? that valuation doesn't make any sense..Is just absurd even with that growth
Year 2012 2013 2014 2015 2016 2017 2018 Revenue 0.972 1.458 2.187 3.2805 4.92075 7.381125 11.0716875 Price/Sales 20.58 13.72 9.14 6.10 4.06 2.71 1.81
If we look at the profits the valuation its even more ridiculous.
The company makes only 20 millions in 2012 and they are expecting a net income for 2013 to be flat, negative or just the same of 2012.. That means that the company its trading at just 1000 times earnings!! (Fw P/E 1000)
What are investor thinking of this valuation? are they really paying 20 billions dollar for a company that doesn't make a cent in profits?
If we look the EBITDA they give a guidance of 320 millions for 2013. So the company is trading at a Fw Ev/Ebitda of 57.85x ---- just absurd!! This are the common signs of a bubble.
Year 2012 2013 2014 2015 2016 2017 2018 EV 19 19 19 19 19 19 19 Ebitda 0.33 0.50 0.74 1.11 1.67 2.51 EV/Ebitda 57.58 38.38 25.59 17.06 11.37 7.58
If we look forward and we assume that the EBITDA will also grow at a 50% rate (and i don't believe that! i think it will slowdown in the next 3 years) the company will be very expensive till 2016 - 2014 assuming that the price stays at 181 usd.
The point here is that it rally doesn't matter that the company have an impressive Growth. This is a bubble and the numbers doesn't match with reality. Investors are paying ridiculous numbers for Linkedin and sooner or later the bubble will pop.
They have a business model that a company like Facebook or Google can get in easy, so this isn't the most impressive model at the time. People say just the same with Monster worldwide (MWW) when the company was trading at 60 usd (now just 5 bucks)
If we look at the weekly chart the situation is just unsustainable with an RSI of 95.6 at almost 10 consecutive weeks going up.
The distance with the 20-40 SMA is more than 50 usd and i think that we will see this company trading at lower, lower levels in the next months.
(click to enlarge)
The thing with bubbles is that the bigger the bubble, the less force is needed to blow and harder the explosion
This company makes me feel like i was in the 2000s .com Bubble and it just need a bad news or disappointing results to have a big drop.
We are taking shorts positions in LNKD at this levels