Gashing Estimates

LinkedIn (LNKD) slashed earnings estimates this quarter. Really bad. Here’s what earnings estimates looked like last qtr (e = estimates):
2012 0.89
2013 1.60e
2014 2.22e
2015 3.36e

Here’s what estimates look like this quarter:
2012 0.89
2013 1.61
2014 1.58e
2015 2.51e

This is bad, really bad. Now profits look to be down this year. Down profits and the stock has a P/E of 128? I just looked at the analyst research reports and I don’t see anyone talking about this.  At least revenue growth is expected to be 38% this year. But the company also cut revenue estimates for this quarter from $470 million to $455-460 million.

One Year Chart

My first mistake not buying LNKD was when it fell to the $90s in November 2012 and I didn’t buy in (I thought about it instead). Then the stock broke out in February 2013 (jumped from $123 to $150 in a week) and off it went. In the one-year chart you can see the stock topped-out around $250 and now has settled back. I dont’ like the look of the downward slope LNKD has made during the last six months.

Look at Estimates. Negative growth expected the next two quarters. and LNKD only beat by a penny last quarter. This isn’t the same stock that roared from $90 to $260.

Fair Value

This is a profitable business, high-growth business and I feel the stock is worth 60 times earnings (yes, even after the earnings gash, because EPS should rebound).

This data was compiled on 3/11/14 when LNKD was $202. During the recent market correction the stock’s dipped to around $175, but still to me its worth $95.

Sharek’s Take

LinkedIn is a great franchise to own — if you were able to get in at lower-levels. Here the stock is selling for around double what it’s worth. That’s a bold call that’s not in line with what other analysts are saying. I don’t think the stock’s in for a big drop, because that would have happened when estimates got slashed. If the market correction continues, LKND stock could get gashed like its earnings estimates just did.