LNKD has tested the $200 support level on several occasions so far in 2014, and bounced each time. But each test of support weakens the support level, as more and more potential buyers exhaust their demand for the stock at that level.
The stock is breaking $200 this morning. LNKD actually bounced on Friday from its post-market lows on Thursday below $200, but the sellers have continued to be aggressive. That was the second straight negative earnings reaction for LNKD. The stock has significantly under-performed the broader market and the social media space over the last 9 months, exhibited by the daily chart:
LNKD is touching $200 this morning, after hitting that level in May 2013. There is still a good amount of trading that took place between 170 and 190 after a strong Feb 2013 earnings report, but below 170, it’s open air until 125:
Here’s the thing about LNKD – I don’t really know why investors were willing to bid it up to $200 in the first place, so I wouldn’t be too surprised if the stock sold back down to $125 over time. The stock is projected to have 40% sales growth and flat earnings growth in 2014, which does not seem stellar for a stock with a 120x P/E multiple.
Among internet high fliers, the few winners generally turn out to be huge growth stories (see GOOG, PCLN), but many competitors fall by the wayside along the way. LNKD might be one such winner in the job search arena, though Monster Worldwide was touted as such more than a decade ago. That’s the risk of paying such high multiples – you better be quite confident that the company does turn out to be THE winner.
I don’t have a position in LNKD, and don’t plan to initiate one, but I would be getting nervous if I were holding the stock. Options traders are pricing in more volatility than usual after LNKD’s earnings event. Here’s 30 day implied vol over the past year:
Perhaps protection buyers are starting to getting nervous too.