Despite general feelings of negativity about social stocks these days, LinkedIn (LNKD) – often described as “the Facebook for job-seekers” – posted a very healthy Q2 revenue 89 percent higher than it posted the year before. The company posted an adjusted earnings of 16 cents per share ($18.1 million) on a revenue of $228 million. Analysts had expected the per-share amount, but predicted it would be on revenue of $216 million. Although the numbers were pretty good, when adjustments for stock compensation and other items were excluded LNKD earned 3 cents per share, down one cent from the year prior. However, the company credited “increased spending aimed at recruiting more employers seeking employees” for the difference and predicted Q3 revenue to come in between $235 million and $240 million, slightly higher than analysts’ estimates of $236 million.
LNKD appears to be performing well, but a few factors have some investors worried. For starters, costs for the relatively young company are likely to remain high in the near future as they continue to promote their services. Sales and marketing increased right along with Q2 revenue, and LNKD has said publicly that these costs will likely “remain high in the short term”. Some analysts also warn that the stock may not be particularly profitable in the near future due to research and development costs and the aforementioned promotional costs. At time of publication, LNKD stock was trading around $108, while some analysts were placing a real value of $44 on the shares. Do you think that these concerns are valid? What do you think of the estimated “real value?”
Thank you for reading the Bryan Ellis Investing Letter!
Your comments and questions are welcomed below.
Category: Financial Markets