LinkedIn (LNKD) had an amazing year. The stock and its profits have pretty much doubled. Sales have grown from $500 million in 2011 to $1 billion last year and a billion-and-a-half this year.
But there’s slick roads ahead. I think profit growth will fall from 77% last quarter to around 30% this quarter. The stock’s selling for 95 times next year’s earnings and may take a big dip in early 2014 as profit growth will slow in all likelihood.
One Year Chart
This company was growing at a triple-digit rate earlier in the year. It’s no surprise the stock’s stopped going up now that profit growth has moderated. What’s scary is estimates of 9% and 7% profit growth the next two quarters.
LNKD is still beating the street by a good margin, but not as good as before. Three and four quarters ago the company put out a total of 80 cents in profits and that was 32 cents better than analysts expected. That last two quarters the company made 77 cents and only beat by a modest total of 15 cents.
Fair Value
I think 60 times earnings is very fair for LNKD. That means the stock falling from $212 to $133. Maybe that won’t happen, maybe the stock will just base for a year until the earnings can catch up to the stock price.
Sharek’s Take
I see slick roads ahead for LinkedIn stock. A P/E of 95 and 30% profit growth would certainly bring in some sellers. I bet this stock drops after the first of the year, I think investors are waiting till 2014 to sell to delay taxation. I think this is a good time to short the stock if you’re a gambler. I choose to like LNKD, but will wait on the sidelines until we can get it at a decent price.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
