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LinkedIn Ain’t Perfect After All

LKND falls under the bar for its Q2 earnings and revenue forecasts


LinkedIn (NYSE:LNKD) has tripled from its 2011 IPO pricing in large part because of its outstanding performance every quarter when it hits the earnings confessional.

That is, until last night.

Q1 numbers weren’t the problem. Indeed, revenues actually spiked by 72% year-over-year to $324.7 million, and net income of $22.6 million (20 cents per share) was a 350% improvement from the year-ago period. LNKD’s sales and adjusted earnings of 45 cents per share easily topped expectations for $318 million and 31 cents per share, respectively.

No, investors — who were vacating the stock to the tune of about 9% Friday morning — were disappointed in LinkedIn’s look ahead.

Next quarter’s forecast is a bit soft. LNKD expects revenues of $342 million to $347 million, with adjusted earnings of $77 million to $79 million. Both are well shy of the consensus for revenues of $359 million and adjusted earnings of $85 million.

Now, LinkedIn is still a tremendous company — with a user base that increased 12.5% quarter-over-quarter to 225 million, with about 64% of those users outside the U.S. — with strong barriers to entry.

LNKD continues to invest heavily in its sales infrastructure and product development. For example, there have been revamps of the mobile apps for Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android operating system, and those apps are rated at around 4 stars, which is encouraging.

LinkedIn also recently launched a new version of its search feature, which has helped to boost engagement, and created Contacts, which is similar to a customer relation management system. These products have helped to improve engagement.

Still, LinkedIn appears to be maturing, which means that the growth rate will inevitably start to normalize. Its core business of recruiting represents about 57% of total revenues, but the year-over-year growth rate in Q1 was 54%. In other words, it could be tougher to find customers willing to look at LinkedIn’s digital solutions.

That’s more problematic considering the stock’s price — at a forward P/E of 97 — reflects expectations of enormous growth.

So even on this current dip, LNKD might best be avoided for now amid signs that its hyper-growth days might be over. However, if substantial bleeding continues from this point, it might be worth reconsidering.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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