Facebook (FB) is preparing to put out its own job board later this summer. Although we don’t know exactly how that will affect LinkedIn’s (LNKD) numbers, it takes LNKD’s risk up a bunch.
Remember Classmates?
I think this is going to hurt LinkedIn. Think back to Classmates.com. Remember when Classmates tried to get you to subscribe to their site so you could stay in touch with your old friends via the Internet? That worked, until Facebook came along and gave you all of that for free.
Facebook Could Kill LinkedIn
Now Facebook is set to dismantle LinkedIn’s business model. LNKD makes money from businesses looking to hire people. The job searchers don’t pay, the companies do. Now all of a sudden Facebook can offer businesses these services for free (or at a lower price). Facebook could kill KinkedIn like eBay and Craigslist killed newspaper classifieds.
The Bright Side for LinkedIn
The good thing about LinkedIn is the people profiles are more refined. No drunk pictures, or douchy comments. I’m sure if I were looking for a job my LinkedIn profile would be spiffy. The Facebook one? Not so much.
I’m sure the people looking for a job would preffer employers stick with LinkedIn. But since the employers are the ones paying the bills, I’m confident it will be their choice to make.
LNKD Was High Anyway
Shares of LNKD were too-high to begin with. This chart from Q2 shows the stock having a P/E of 168. Perhaprs the stock can earn a dollar next year and then the shares would “only” be selling for around 100 times earnings (LNKD selling for $102 now).
Added Risk to LNKD
Even if Facebook doesn’t hurt LinkedIn, LNKD stock just took on added risk. No longer can we think LinkedIn has the ability to grow rapidly. Now there’s a serious risk to the business model. That risk means LNKD isn’t work the same P/E it was last month.
I had LNKD’s Fair Value at $41 last quarter. That’s 60 times earnings. Now the P/E should be lower — say 40 to 50. That means this stock could be worth $27 to $34 a share. LNKD looks like a good stock to short.
Disclosure: at the time of publication clients of David Sharek owned shares of FB.