LinkedIn Stock: Time to Invite It to Your Portfolio? (LNKD)

Plenty of growth potential makes this professional social site the dominant player in a critical market

Monday morning was a bloodbath, but the market washed much of that carnage off of the street by mid-day, as the panic selling subsided. But by Monday’s closing bell, several stocks were well-off their highs, especially for those that have been the darlings of the markets.

LinkedIn Stock: Time To Invite It To Your Portfolio? (LNKD)So, which to consider? While there are certainly many to choose from, it is probably still best to focus on those that have solid businesses and durable long-term advantages. And one that fits the bill is LinkedIn (LNKD).

LinkedIn survived Monday’s broad-market selloff pretty well intact, bleeding only fractionally. But shares are down 25% for the year-to-date, and even worse over the past couple months. Consider that over the past year, the LinkedIn stock price has gone from a high of $276 to $172. That’s about a 37% drop.

Now, none of this should be a surprise. Let’s face it, LinkedIn stock did seem overextended with a valuation over 100 times forward earnings. This was excessive even among other tech highfliers such as Facebook (FB).

Regardless, LNKD represents a unique player in the mobile and desktop world, redefining the traditional resume to be more dynamic and social. It’s unique stature in social media means there’s little competition to overtake the company, which has been a big driver for LinkedIn stock over the years.

LinkedIn Stock: Endorsed for Skills and Expertise

LinkedIn has amassed a tremendous user base (which is now at about 380 million), and has continued to grow its premium subscription revenue at a hefty pace, up 22% during the second quarter.

Mobile, too, has also been an engine of growth, as 52% of all traffic to LinkedIn comes from smartphones and tablets.

But that doesn’t mean LinkedIn hasn’t been without a few nagging issues. Perhaps the most important has been LNKD’s anemic efforts at innovation. For the most part, the mobile apps and website have seen little improvement over the years. Maybe the reason is that the strong growth has led the company to become too complacent.

The good news, however, is that there are signs that LinkedIn is taking steps to get things back on track: The company is launching a new version of its Pulse app, which is now one of the top ranked business news readers on Apple’s (AAPL) App Store and Google’s (GOOG, GOOGL) Play Store. There is also the Lookup app, which allows people to connect within the same company. Ultimately, this could be a useful tool to allow for more collaboration and better project management.

Acquisitions have also been important — and cost-effective because the dealmaking was done when LinkedIn stock was at lofty levels. For example, the company purchased Careerify, which is an automated employee recruiting tool. And of course, there was the purchase of (an online learning company) for $1.5 billion.

In terms of the financials, LinkedIn is golden. The full-year forecast is for revenue growth of 33%. It certainly helps that the company has four revenue streams: talent solutions, marketing, premium subscriptions and online learning. Then there’s that $3 billion LinkedIn has in the bank.

So LNKD is still in a nice position for dealmaking, which may ramp up if valuations start to get more reasonable.

Bottom Line on LNKD

Now, it’s true that LinkedIn stock is still pricey (trading at roughly 50 times forward earnings), but its growth remains strong and product development efforts are ramping up. Besides, there is still plenty of runway left for LinkedIn stock to soar from, such as in Europe and Asia.

In other words, investors looking for a long-term play on social and mobile with multiple revenue streams and strong barriers to entry, LinkedIn stock certainly looks like a good play right now.

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.

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