LinkedIn Corp (NYSE:LNKD) stock suddenly became a hot topic in recent weeks. Unfortunately, it’s the massive drop in LinkedIn’s stock price that put the company on the front page. In just one trading session, LinkedIn stock plunged a staggering 43%. Ouch!
However, here’s the thing. While sentiment has been more than bearish, the company is not over. In fact, since its dramatic tumble on February 5, LNKD stock has been steadily climbing higher. And a major turnaround isn’t really out of sight.
In case you haven’t noticed, LinkedIn has been beating estimates left right and center. In the most recent quarter, the company’s revenue totaled $862 million, beating analysts’ expectations of $858 million. As for the bottom line, LinkedIn generated adjusted earnings of $0.94 per share, smashing Wall Street’s earnings-per-share (EPS) estimate of $0.78. (Source: “LinkedIn Announces Fourth Quarter and Full Year 2015 Results,” LinkedIn Corp, February 4, 2016.)
Note that those numbers not only beat analysts’ estimates, but also 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 earnings per share growing 54% year-over-year.
And let’s not forget how well LinkedIn did last year. The company beat analysts’ EPS estimates in all four quarters of 2015. In three out of the four quarters, LinkedIn delivered earnings beats of at least 20%. (Source: “Analyst Estimates,” Yahoo! Finance, last accessed March 14, 2016.)
Now, as the company lowers its guidance, analysts are also making downward adjustments to their EPS estimates. While this doesn’t usually seem to be good news, it does imply that LinkedIn will see a lower bar for its performance in the current quarter, and hence a higher chance of delivering another earnings beat.
The Bottom Line on LNKD Stock
Of course, we shouldn’t forget that it only took a 43.6% drop for LinkedIn stock to crash from $192.28 to $108.38, but for it to go from $108.38 back to $192.28, it would need a 77.4% surge. And while the recent climb has been steady, the percentage increase is nothing compared to what it needs to go back to its pre-crash high.
All in all, there is still a lot yet to unfold for LNKD stock.