LinkedIn Corp (LNKD) stock hasn’t done much of anything for investors this year. Down 8% year-to-date, shares of the professional social network have basically been trading sideways for the past two years-plus.
If LNKD stock wants to become a “real deal” tech giant, one that investors will care about for years or perhaps decades to come, it needs to start distinguishing itself. Right now.
LinkedIn stock holders can at least be thankful LNKD is consistently profitable with a proven business model. In that respect, it has a major leg up on Twitter (TWTR), which routinely loses money.
But whether its worth adding to your portfolio ahead of earnings is another story.
LNKD Earnings Estimates
Wall Street is looking for LNKD to post earnings per share of 46 cents in the third quarter, down 11% from the 52 cents it made in Q3 2014. Revenue, however, is expected to surge 33% to $755.64 million.
Unfortunately, LNKD stock has a tendency to be less about EPS and revenue and more about forward guidance — at least that’s been the tale of the tape in 2015. Last quarter, for instance, LNKD posted a blowout Q2 by the numbers:
“LinkedIn earned 55 cents per share on $711.7 million in revenue. Both figures pretty well trounced estimates. The pros were only looking for a profit of 30 cents per share of LNKD stock, and revenue of $680 million.”
How was LNKD stock rewarded? Shares got hammered, retreating 10% as display advertising revenues fell 30% and user growth stagnated quarter-over-quarter.
The display ad meltdown was seen to a lesser extent in Q1 results on May 1. Again, LNKD beat on both revenue and EPS, but soft guidance and a troubling decline in display ads — an issue that has also plagued Yahoo! (YHOO), sent shares spiraling 20% lower.
Listen, no one expects LNKD to attract the kind of attention from advertisers that Facebook (FB) does. But it would be nice to see some substantive user growth … preferably without having to settle another $13 million lawsuit over allegations the company was improperly emailing users’ contacts in an effort to grow its network.
Maybe the class on “Blitzscaling” LNKD cofounder Reid Hoffman is teaching at Stanford should skip that part of the lesson plan.
Bottom line? Display ads need to show some sign of a comeback, and some meaningful user growth would be nice to see as well. At a forward price-to-earnings of 60, LNKD has yet to prove why it deserves its premium valuation.
It’ll have its chance after the closing bell rings on Thursday, Oct. 29.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
