MorningWord 4/29/16: $LNKD Is Awaiting Your Repsonse

by Dan April 29, 2016 9:52 am • Commentary

Shares of LinkedIn (LNKD) are up about $7, or about 5.5% this morning following better than expected Q1 results, and a bump to guidance, from Bloomberg:

From press release:

  • 1Q adj. EPS 74c, saw ~55c in Feb., est. 60c
  • 1Q rev. $860.7m, saw ~$820m, est. $827.9m
  • 1Q adj. Ebitda $222.2m, saw ~$190m, est. $195.5m

But let’s take a step back before we can take a step forward. Back on February 4th, prior to the company’s disastrous Q4 results that sent the stock down 43% here were consensus estimates for Q1 just reported:

  • 1Q adj. EPS est. 75c
  • 1Q rev. est. $867.1m
  • 1Q Ebitda est. $214.96m

When you look at last night’s results, they still came in LOWER than consensus from three months ago. But the stock is down big since the massive Feb guide down so there’s now a relief rally. It’s all a Fugazi. Where’s the relief?

I’ll also add that the 74 cents in earnings the company reported for Q1, on A GAAP basis is a loss of 35 cents.  If you are valuing LNKD on a P/E to Growth, you are using the wrong metric. On an adjusted basis the company is expected to grow earnings 19% in 2016, and trades 36x, but their expected $3.35 in EPS for the full year they just guided to looks more like a loss of $1.35.  Sales growth has been decelerating meaningfully for the last 4 years since their 2011 IPO. 2012’s nearly $1billion in sales grew 86% yoy, followed by a 57% rise in 2013, 45% rise in 2015 and expected 24% rise in 2016. LNKD trades 4.5x expected 2016 sales of $3.7 billion. I might remind you that Facebook’s (FB) Q1 sales just reported ($5.38 billion) grew 52% year over year.  I don’t make the comparison to suggest that FB, at nearly 13x sales is a better buy, they are both completely mental. But FB’s sales in 2016 are expected to be $26 billion, nearly 7x that of LNKD with much higher and stable growth and far better visibility.

Since going public and reporting their fist public quarter in August 2011, the average one day move following earnings for LNKD has been about 12%.  The chart below shows some of the recent earnings gaps. This tells me one thing and one thing only. The company is very poor at forecasting their own business. In my mind their forecasts lack credibility:

From Bloomberg
From Bloomberg