LinkedIn Corp (NYSE:LNKD) stock crashed on Friday after issuing weak guidance for the first quarter of 2016. But according to Credit Suisse analyst Stephen Ju, the dip may be a buying opportunity for investors.
Although Ju cut LinkedIn’s price target based on lower guidance, he remains bullish on the stock, maintaining his “Outperform” rating. (Source: “Credit Suisse Cuts LinkedIn From $330 To $230,” Benzinga, February 5, 2016.)
“We are buyers of LNKD shares into the weakness,” Ju noted. He argued the company is showing promise with strong corporate customer additions, growing contribution from sponsored updates, increasing user engagement, and accelerating growth of its “Sales Navigator” product.
LinkedIn reported first-quarter earnings guidance of $0.55 per share, way off of analysts’ expectation of $0.74 per share. Revenue guidance also fell well short of analysts’ expectations—$820.0 million compared to expectation of $866.9 million.
The company acknowledged in its conference call that the lower guidance is the result of a reshuffling of its product strategy, which will impact short-term growth but ensure longer-term growth. (Source: “LinkedIn Outlook Tanks Stock, Though Q4 Earnings Beat,” Investor’s Business Daily, February 5, 2016.)
As a result of the lackluster guidance, Ju cut his price target for LNKD stock from $330.00 to $230.00. That’s almost a 105% upswing from Friday’s stock price.
Ju noted that the lower guidance is impacted by LinkedIn ending its “Lead Accelerator” product, which the company acquired from Bizo in 2014. The closure of Bizo will have about a $50.0-million impact on earnings, and the continued decline of their “Premium Display” product, which will have another $50.0-million headwind.
Despite the lowered first-quarter guidance, LinkedIn’s 2015 fourth-quarter earnings were above analyst forecasts. LinkedIn reported fourth-quarter revenue of $862 million, above analysts’ forecasts of $857 million, which was up 34% from last year. Earnings per share were $0.94, demolishing analysts’ forecasts of $0.78.