LinkedIn Corp’s (LNKD) lackluster year has turned back around today.
Third-quarter LinkedIn earnings show that LNKD is growing at a hefty pace, and Wall Street is taking notice, driving LinkedIn stock up more than double-digits by midday.
LNKD revenues grew 44.6% year-over-year to $568 million to top the Street consensus of $557.6 million and the company’s own estimated range of $543 million to $547 million. But the company also showed traction on the bottom line; adjusted profits came to 52 cents per share, which was ahead of the analysts’ consensus of 47 cents per share.
This resulted in strong cash flows, which for Q3 came to $181 million. Moreover, LinkedIn has a hefty $2.3 billion in the bank — a decent piggy bank for a $28 billion company (by market capitalization).
The report wasn’t completely positive, sure. Guidance was light at projected Q4 revenues of $600 to $604 million and adjusted earnings of 49 cents per share. The brains on Wall Street are hoping for $612 million and 52 cents per share, respectively.
However, this didn’t really serve as a drag on LinkedIn stock because management has a history of conservative forecasts.
The pleasing overall performance of LinkedIn comes in stark contrast to many of the other of the top social media operators. During the past couple weeks, companies like Facebook (FB), Twitter (TWTR), Pandora (P) and Yelp (YELP) have suffered big declines in their stock prices thanks to weak guidance.
But LinkedIn is very different from these operators.
LNKD does not rely heavily on advertising, which can be a volatile way to earn your keep. Instead, the company has three core segments: Talent Solutions (recruiting), Marketing Solutions (targeted advertising) and Premium Subscriptions (providing more features to manage profiles). In Q3, all three businesses posted 40%-plus gains in revenues.
It certainly helps that LNKD remains a highly engaged platform. If anything, it has become the go-to place for professionals. During the latest quarter, cumulative members grew by 28% to 332 million and unique visits rose by 16% to 90 million per month. And yes, a key driver has been mobile, which now accounts for about 47% of all traffic.
Some of the efforts that have helped with user growth include a new job-matching service (which came from the acquisition of Bright), better news aggregation (from the acquisition of Newsle), increased original content and a new app for jobs.
But there’s more room for growth. About three-quarters of new member acquisition is coming outside of the U.S., and China looks like a major catalyst. Meanwhile, LNKD has recently introduced features to attract college and high school users as well.
Now even with all this good news, investors might want to hold off on LNKD for now. Today’s spike is fairly significant and there’s a good chance there will be some type of pullback.
But for long-term investors that are looking for a way to play social media – but want a business model that is less reliant on advertising – then LinkedIn stock remains a pretty good bet.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All 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.
