More Upside for LinkedIn Stock?
I hope that you’ve been reading about our analysis of LinkedIn Corp (NYSE:LNKD) over the past few weeks. Indeed, we expected LinkedIn stock to rebound and it has gained some 10% since the start of 2016. LinkedIn’s latest quarterly results have shown that the company is far beyond its plunge last quarter as it issued higher-than-expected results.
Perhaps the bearish sentiment over LinkedIn stock is the company’s own fault. For the past three months, LinkedIn has issued bearish guidance, warning the markets that its revenue would decline. In fact, while LinkedIn announced first-quarter 2016 revenue guidance of $820 million, it delivered $861 million. The company still has a deficit, with a net loss amounting to $45.0 million, the same as last year.
Yet, LNKD stock was trading well above $200.00 per share at this time last year. Now, it’s at the $120.00-per-share level and recovering from its landslide collapse last February. There is sufficient optimism to suggest LinkedIn stock is cheap these days. Indeed, one of the key indicators for the company’s performance has improved.
In the first three months of the year, LinkedIn has reversed the trend as the number of unique visitors has risen from 100 million to 106 million. LinkedIn also beat estimates on members. It claimed 433.0 million members at the end of the first quarter instead of the 427.9 million analysts had expected. (Source: “LinkedIn shares soar after big beat on top and bottom,” CNBC, April 28, 2016.)
The number of page views was even greater in percentage terms, jumping from 37 million to 45 million—the highest increase ever recorded by the company in this area. (Source: “LinkedIn Surpasses Expectations, Offers Positive Outlook,” The Wall Street Journal, April 28, 2016.) What LinkedIn investors can take from the latest quarterly performance is that LinkedIn, as a social network par excellence, has gone back to its roots.
LinkedIn has learned its lesson and issued a more optimistic forecast, understanding that such optimism will spread throughout the network. The company now expects revenue to increase to some $885 million to $890 million. (Source: CNBC, op cit.)
Perhaps, while Facebook and Twitter, two different kinds of social networks, have gradually redefined themselves and carved out specific niches, LinkedIn may still suffer from a problem of perception.
LinkedIn still raises the legitimate question: what is it? It’s not really a headhunting web site. But it is a way for people to collect hundreds of relationships that they would otherwise never establish. The ties might be weak, but they offer new ways for considering your profession or activity, keeping up to date with interesting information, which you can tailor to suit your needs and interests.
Indeed, it is essential for LinkedIn to promote the benefits of joining. The fundamental question to address is this: what can LinkedIn do for users? A good answer would do wonders for increasing user numbers. For starters, where companies, rather than individuals, are concerned, LinkedIn allows them to design sharp business campaigns based on such professional categories as size, job title, industry type, and location, which can draw out specific people and potential partners in a radar-like fashion.
The ability to achieve highly specific profiles—based on professional details, rather than purely personal/social ones—is the main reason why individuals and businesses alike should invest in creating and maintaining LinkedIn profiles. Users seem to be aware of the prospecting and lead generation functions, ignoring the site’s advertising potential.
In fact, LinkedIn provides a range of advertising formats and tools to promote brand awareness and lead development. For instance, LinkedIn may adopt a feature similar to Facebook’s “Instant Articles.” This would allow publishers to host content directly on LinkedIn rather than through links that direct people back to their own sites. (Source: “LinkedIn Exploring Its Own Version Of Facebook’s Instant Articles,” BuzzFeed, May 5, 2016.)
Ultimately, LinkedIn is a company that is still evolving and redefining its role. The benefit to investors is that after the hype, LNKD stock has found some humility, losing some 60% of its value last February. Investors can gain from its current low value and higher-than-ever growth potential. LinkedIn has shown some humility, learning from other social media companies, adapting its approach to grow.
The current price target ranges from the bearish $120.00s to the bullish $220.00s. Even the low-ball prices for LNKD stock would produce a gain. (Source: “LinkedIn Corporation (NYSE:LNKD) Broker Price Targets For The Coming Week,” Share Trading News, May 9, 2016.)