LinkedIn Is a Glorified Rolodex:
Last Thursday LinkedIn reported first-quarter earnings, and investors jumped for joy. Wall Street analysts slapped a $140 price target on the stock and burned up the phone lines making sure their best customers heard the news. But I believe this stock will easily get cut in half. LinkedIn investors are totally disconnected from reality.
I know, I know -- you think it's some kind of valuation call, right? The stock is up 75% year-to-date and is trading at a ridiculous 1,200x 2012 GAAP estimates of $0.09, so you think I'm worried about valuation, right? Wrong. I think slowing revenue growth and out-of-control expenses will trip up LinkedIn. Isn't this company just building a headhunting firm on the Internet? LinkedIn is the Web 2.0 version of Robert Half. What's so special about that? Been there, done that.
If you look at the company's slide deck from the company's first-quarter presentation, it's not very hard to see that revenue growth has already slowed. On slide five, revenue growth peaked during the third quarter of last year. It's on the chart. You can't miss it. I didn't listen to the conference call, so I didn't hear what management said about the slowdown in revenue growth, but I would think they would blame seasonality. Why not? Everybody else does. In the previous first quarters, revenue growth accelerated. Shouldn't that trend continue if they are on some humungous revenue run for the roses? Don't growth companies power through seasonality?
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Last Thursday LinkedIn reported first-quarter earnings, and investors jumped for joy. Wall Street analysts slapped a $140 price target on the stock and burned up the phone lines making sure their best customers heard the news. But I believe this stock will easily get cut in half. LinkedIn investors are totally disconnected from reality.
I know, I know -- you think it's some kind of valuation call, right? The stock is up 75% year-to-date and is trading at a ridiculous 1,200x 2012 GAAP estimates of $0.09, so you think I'm worried about valuation, right? Wrong. I think slowing revenue growth and out-of-control expenses will trip up LinkedIn. Isn't this company just building a headhunting firm on the Internet? LinkedIn is the Web 2.0 version of Robert Half. What's so special about that? Been there, done that.
If you look at the company's slide deck from the company's first-quarter presentation, it's not very hard to see that revenue growth has already slowed. On slide five, revenue growth peaked during the third quarter of last year. It's on the chart. You can't miss it. I didn't listen to the conference call, so I didn't hear what management said about the slowdown in revenue growth, but I would think they would blame seasonality. Why not? Everybody else does. In the previous first quarters, revenue growth accelerated. Shouldn't that trend continue if they are on some humungous revenue run for the roses? Don't growth companies power through seasonality?
...
Click to view a price quote on LNKD.
Click to research the Internet industry.
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