Professional networking social media company LinkedIn (LNKD) reported its first-quarter results after Thursday’s close, and while the period’s numbers were nice, LinkedIn’s outlook spooked investors, who sent LNKD stock selling hard.
LinkedIn earnings came to 38 cents per share, beating consensus estimates for 34 cents. The top line also came in hot, at $473 million to beat expectations for $466 million. Also, LNKD reported that it added 19 million new users for a total of 296 million. Total pageviews also improved from 11.1 billion in the year-ago period to 11.5 billion.
However, what pulled the rug out from under LNKD stock was the company’s outlook. While the company raised its fiscal 2014 revenue guidance from a range of $2.02 billion-$2.05 billion to a range of $2.06 billion-$2.08 billion, that still disappointed analysts, who were looking for north of $2.1 billion.
LNKD stock declined more than 8% on Friday, though analysts mostly kept their positive biases on the stock … but considering LinkedIn’s steep decline since last summer, this might be somewhat irrelevant.
Stifel Nicolaus has a “buy” rating on LNKD stock with a price target at $240, Credit Suisse kept its “outperform” rating and has a price target at $270, and UBS actually upgraded the stock to a “buy” with a price target at $225. As always, I am not using the analyst calls as any guidance, but rather for perspective on what consensus in LinkedIn is, which becomes particularly important if and when shares were to plunge further.
LNKD Stock Charts
On the multiyear chart, the recent selloff in LNKD stock took it back to its late 2011 uptrend for the first time since November 2012. From this perspective, we might be able to slap the “mean-reversion move” label on the 40%-plus selloff since the September 2013 highs.
In other words, LNKD has reached somewhat neutral territory, which somewhat lessens the appeal for the bears … but without any bottoming confirmation, also doesn’t entice the bulls just yet.
On the daily chart, this picture becomes even more clear. As mentioned earlier, LNKD stock sank 8.4% last Friday, which left a nasty outside bar behind on the daily chart.
Renewed bearish momentum has returned; in the intermediate to near term — barring any quick, bullish reversal — this could lead LinkedIn to break below the late April lows and force shares into the low to mid-$120s, which would result in a filling of the up-gap from February 2013 (blue box). Traders interested in this setup could use last Friday’s intraday highs as their stop-loss.
For the bulls, as mentioned above, some more patience is needed until a bottoming confirmation is in place. From where I sit, a bullish turnaround confirmation would not be accomplished until the stock can overcome the $160 area again on a daily closing basis.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
