Shares of LinkedIn (LNKD) jumped from $124 to $150 after the company reported blowout earnings last week. Revenue rose 81% and profits soared 192%. All three of LinkedIn’s revenue streams sizzled (share of revenue is in parenthesis):
- Talent Solutions (52%) – revenue from companies and headhunters looking for employees rose 90%.
- Marketing Solutions (27%) – ads LNKD sells on its site had growth of 68%.
- Premium Subscriptions (19%) – people who pay for extra services had growth of 79%.
Overall everything is clicking, and I especially like the fact profits grew WAY faster than revenue (see that Google and Facebook? That’s how its done).
One Year Chart
This stock is extremely extended now, but it can keep climbing because there’s no ceiling to the shares. The last four quarters profits have gone from $0.15 to $0.16, $0.22 and $0.35. What’s next? 50 cents? Next quarter’s estimate is 30 cents.
The company has also trounced estimates the last two quarters, beating a 13 cent estimate by 9 cents (2QtrsAgo) and a 18 cent estimate by 17 cents (LastQtr). The fundamentals are on fire! So is the stock!
The negatives? 2013 estimates only increased from $1.28 to $1.31, as shown in the Earnings Table below. Such a big beat last quarter should have pumped up estimates. 2014 estimates just declined from $2.14 to $2.05. Oh, and the P/E is out the ying-yang, but that doesn’t matter because LNKD keeps crushing estimates. As long as that keeps happening, the sky is the limit.
Fair Value
I think LNKD is worth 60 times earnings, but we won’t get a chance to get in that cheap. Last quarter , the P/E got down to 77 and I should have just bought then. Also, this stock is really extended and if LNKD doesn’t whip estimates then the stock could come crashing down. BTW, LNKD only met estimates 3QtrsAgo.
Sharek’s Take
LNKD is clearly one of the hottest stocks around and the sky is the limit as long as the company keeps trouncing estimates. This is a stock we must try to buy, but we have to be patient and wait for another entry point. What is that? I don’t know. We’ll have to get either a good P/E or a good chart reading.
- P/E: 77 times earnings isn’t a good P/E but it is what the stock was last quarter. 77 times current 2013 estimates is $100.
- Chart: The chart shows an extended stock. you’re going to have to overpay if you want LNKD, but this stock is a leader and investors who own it have been rewarded for overpaying. The last breakout point was $125, and LNKD gapped up out of that price so if the stock comes back to fill that gap it will have to touch $125.
LinkedIn is growing like gangbusters but continued explosive growth will be because the company is expanding well overseas. That’s tough to judge from where I sit. At this moment we have to wait for the stock to calm down a bit before getting in.
View the Earnings Table here. View the Ten-Year Chart here.
