LNKD Stock: This Is Why the Bears Are Wrong on LinkedIn Corp

LNKD StockUpside for LNKD Stock?

LinkedIn Corp (NYSE:LNKD) suffered a major blow last February when LNKD stock lost about 40% of its value over bearish revenue and guidance for 2016. Still, the way to look at this is that LinkedIn stock is 40% cheaper. This could be an opportunity for investors, especially those who could not afford to get into LinkedIn’s bold premise before.

Some of LinkedIn stock enthusiasts, like Barclays’ Paul Vogel, have harshly downgraded the stock Vogel downgraded LNKD stock to “Equal Weight.” He chopped the price target to $130.00 from $205.00. Meanwhile, LinkedIn’s average price target is $175.00. (Source: “Analysts’ Estimates,” Yahoo! Finance, last accessed April 1, 2016.) Given that LNKD stock is trading at $115.00, even the most bearish analysts see upside.

One of the main considerations for those thinking of investing in LNKD stock for the first time is that LinkedIn’s Q4 2015 growth was 34%. (Source: “LinkedIn Q4’15 Results,” CNBC, February 5, 2016.)

Since the drop, LinkedIn stock has trounced analysts’ estimates. In the most recent quarter, the company’s revenue totaled $862 million, beating analysts’ expectations of $858 million and Wall Street’s earnings-per-share (EPS) estimate of $0.78. (Source: Ibid.)

The results represent significant year-over-year growth. LinkedIn’s fourth-quarter revenue was 34% higher compared to the year-ago period. The bottom line turned out to be even better, with EPS growing 54% year-over-year. Admittedly, it was easy for LNKD to drop from $192.00 to $108.00 per share. It will be much harder to rise back to that level, but the trend is favorable for those who got in cheap. Those who lost on the crash may want to consider holding on.

Some of the analysts set a high target of $300.00. The most bearish of them set a price of $135.00. At the current price, that still represents a $25.00 upside. (Source: “Stock Price Target for LinkedIn Corporation (NYSE:LNKD),” Markets Daily, February 24, 2016.)

LinkedIn stock warrants optimism because of the high rate of membership growth. Total members at the end of the fourth quarter were about 414 million, up from 347 million from the same period a year ago. That makes for an impressive membership growth rate of 20%. By these measures, LinkedIn is growing faster than Facebook Inc (NASDAQ:FB) with 14% and Twitter Inc (NYSE:TWTR). LinkedIn boasts one of the largest user and content bases.

Other statistics include unique page views on mobile devices or content sharing, which also grew by a respective 43% and 40%. LinkedIn has not lost its shine and users continue to find it relevant. Talent Solutions, LinkedIn’s main revenue generator (62% of revenue in Q4 2015), grew 32% year-over-year in the latest quarter. However, perhaps investors were disappointed by the guidance, since management expects this growth rate to be closer to the mid-20% range in 2016.

Indeed, LinkedIn stock has suffered from a malaise well beyond its reach. Investors are afraid that the global stock markets are heading for a replay of the bursting of the tech bubble that occurred in 2000 or the 2008 subprime crisis. This is the impression early this year, which has been rather unkind to technology stocks, including LNKD stock. In this climate, any fickle excuse is enough to spark selling.