Taking A Look At LinkedIn
LinkedIn Inc. (LNKD) released its earnings report for the first quarter of 2013 several days ago. The company beat analyst expectations, reporting growth across all 3 of its major revenue generators. While the stock may have appreciated ~3% in the trading day, it dropped ~11% in after hours trading. The after-hours drop in the stock’s value may be attributed to a weaker than expected outlook released by the company. The corporation is far from struggling, however. We must look at the corporation and its financials to determine whether its stock will continue to grow in value or flatten out.
LinkedIn posted an earnings report that would satiate the most rabid of investors. The professional social network announced GAAP earnings of $324 million in the first quarter, up from $188 million a year prior. LinkedIn also reported a diluted earnings per share of $.20, five times what it was during Q1 2012. This marks two years of LinkedIn beating analyst expectations, as well as 3 quarters of double digit earnings per share growth.
LinkedIn is different from other social media websites in that it doesn’t rely solely on advertisements for revenue. The social network has 3 distinct revenue segments. The first of these revenue segments is titled “talent solutions”. Talent Solutions allows companies to post jobs on LinkedIn and screen for potential hires. This segment of LinkedIn’s revenue grew to $184.3 million, an 80% increase from the year prior. Another of these revenue segments is “marketing solutions”. Marketing Solutions is LinkedIn’s way of saying “advertisements”. These are ads placed directly on the website and its mobile counterpart. Marketing Solutions revenue grew 56% in the last year to $74.6 million this past quarter. The last of LinkedIn’s revenue streams is its premium subscription feature. Premium subscriptions allow LinkedIn users to see everyone who viewed their profile, as well as a host of other perks. Revenue from this segment grew to $65.6 million, up 73% from a year ago.
LinkedIn has seen its revenue streams grow steadily over the last year. There seems to be constantly growing demand for its services, as analysts have underestimated LinkedIn’s ability to pull in revenue for 8 quarters running. The fact that the company also has diversified revenue streams allows it to remain healthy if one of them falters. This has yet to be the case, however – there has not been one quarter where all of LinkedIn’s offerings haven’t grown.
The Stock Dip
LinkedIn stock dipped about 11% in after hours trading. There was no reason for this apart than the conservative revenue estimate announced by the corporation for the current quarter. LinkedIn stated that it expects somewhere between $342 and $347 million in revenue for Q2 2013. While this may seem relatively stagnant, keep in mind that predictions and reality are two different things. LinkedIn has blown analysts out of the water for 2 years straight. While the corporation will undoubtedly experience a slowdown in subscriber growth, its revenue should continue to grow steadily for a while longer. The management is simply choosing to be conservative in their estimates. I believe that the company will continue growing, albeit at a slower pace. It is for this reason that I am long LinkedIn.