LinkedIn Corp. (NYSE:LNKD)

CAPS Rating: 2 out of 5


Player Avatar jsn1080 (40.50) Submitted: 9/4/2013 12:16:30 PM : Underperform Start Price: $96.10 LNKD Score: -87.05

I thought $96 was outrageous when I intiated my CAPS short pick on LNKD and I now the stock is up over 100% since my pick.

LNKD stock valuation is reminiscient of 1999 .com valuations - ridiculous. Really, someone is willing to pay $240 for $0.35 of TTM earnings. With the imminent dilution of shares, how soon will LNKD earnings reach $12 or $24 - maybe a decade if shareholders are lucky. If earnings do hit $12, do you really think the market will be willing to sustain the same trailing P/E ratio of 600+ or the forward P/E of 118? I think not, and if I am right, then even if the earnings did reach between $12 adn $24 in the next decade, then I bet investors will still be value the company a $240 share equivalent ($27B company as a whole). I'd rather buy Norfolk Southern Railroad (NSC) for $23B (or a portion thereof) and still have a few billion left over.

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Member Avatar Juggernaut0609 (92.19) Submitted: 9/5/2013 12:27:12 PM
Recs: 0

Go look at facebook :-P

There's a reason your overall fool score is less than 45% of people on here. Go open a balance sheet on LNKD, then make a post.

Member Avatar jsn1080 (40.50) Submitted: 9/5/2013 1:56:50 PM
Recs: 0

I prefer to look at the franchise as a whole, the balance sheet alone may look good, but as the same time you need to look at what price the market is reflecting for ownership of the franchise. I find similar balance sheets at other companies, namely, EBAY, NOV, and GLW that have current assets that exceed total liabilities and that also have stable cash flow offered at far better prices (and less risk IMO).

Please enlighten me on what exactly is reflected in LNKD balance sheet justifies the market cap. Surely it couldn't be the value that a new investor would receive as $1.40 in assets for the price of $246.

Member Avatar Juggernaut0609 (92.19) Submitted: 9/5/2013 6:35:19 PM
Recs: 2

First off, EBAY is an online retail/auction stock, NOV is an energy company and GLW is an electronic instrument and controls company. Corning is the only company listed in the same sector (technology) as LNKD, but it's still in the wrong industry. To compare any of those three stocks to each other let alone LNKD is like comparing apples and oranges.

That said, I am going to break down exactly how I value this stock from beginning to end, so you can understand why LinkedIn is such a big deal.

Let's start with one of the most basic indicators of room for growth in a stock; the P/E. The average P/E for LNKDs industry is around 27. LNKD is at about 600. That means the price of LNKD is high compared to its earnings relative to the rest of the industry. This says one of two things to a saavy investor: The stock price is too high OR investors are very optimistic on the outlook of this company and expect its earnings to catch up.

In order to choose one notion over the other, we have to confirm this. Let's take a looks at the annual revenue growth. From 2008 until this year, LNKD has nearly doubled its revenue annually (79,   120,   243,   522,   972 <-- These are the annual revenues in millions). That's a 100% Revenue growth annually.

That revenue growth has me intrigued, how is it doing as far as debt goes? Well, it has 0 long-term debt (so, if the market fell apart tomorrow, it wouldn't kill the company) and it has been growing its liabilities at a similar rate as its revenue! Well, how is the equity doing? The equity has been growing at double the rate of the revenue and the liabilities?!

This company can't be all roses and starshine, can it? Let's look at what percentage of the company is owned by management and institutions. Over 85% of this company is held by investing institutions, meaning people's pension and retirement are trusted to this company's growth... I would say that's a big deal. Not to mention, the CEO, CFO and Director of the company own over half a million shares.

I'm not sure how else to tell you this, but LinkedIn is only going up. It's the facebook of the business world and they did it the right way.

Member Avatar iamvoltron (24.51) Submitted: 10/3/2013 4:06:26 PM
Recs: 2

Twitter will join FB and LNKD soon with a similar (insane) valuation. Social Media stocks are in a bubble.

Member Avatar Mega (99.97) Submitted: 10/6/2013 8:58:36 PM
Recs: 4

Juggernaut, your balance sheet analysis is misguided. The bottom line is that $1.1B in tangible book value doesn't support a $27B market cap. The balance sheet can never justify a high growth valuation. For that you need to look at earnings and cash flow, combined with qualitative analysis of their market opportunity.

Also, bringing up jsn's CAPS score is an irrelevant ad hominem argument. Don't be a jerk.

Member Avatar baselineace (< 20) Submitted: 10/17/2013 7:28:57 PM
Recs: 0

You were wrong before and now you are doubling down on your wrong bet? I hope you're not shorting this with real money...

Member Avatar PoorSenator (41.71) Submitted: 11/23/2013 3:15:31 AM
Recs: 0

Those of us who got in around $100 are smiling. Definitely time to cut the position though. I'll sell half and let the profits ride.

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