LinkedIn Corp (LNKD) has carved out an interesting niche for themselves, combining the personal and the professional as a social media company centered around people’s non-social work lives. The networking company, which connects users via the professional connections, has amassed over 225 million users. And, of interest to investors, has beaten earnings expectations all eight quarters since the company went public.
Following the recent success of Facebook Inc (FB) Wall Street has renewed faith in social media’s ability to capitalize on the growing shift to mobile. Year-over-year ad revenue for LinkedIn grew 56 percent from Q1 2012 to Q1 2013.
Unlike Facebook, LinkedIn isn’t nearly as dependent on ad revenue to stay afloat. The company only gets around a quarter of their revenue via advertising. The lion’s share of LinkedIn’s revenue comes from selling greater amounts of access to its vast stores of information it has on users. As LinkedIn's social media experience is centered around the user's professional careers, participants routinely post resumes, work histories, skill sets, and endorsements on their profiles. LinkedIn, in turn sells this information to corporate recruiters – and also to other users via the LinkedIn Premium feature.
The fact the company, unlike most social media, has three different sets of revenue streams – advertising, user subscriptions, and information sales – has excited investors ever since the company first went public. LinkedIn had its IPO on May 11, 2011 at $45 a share. Investors rushed to buy in, and the stock skyrocketed, closing that day up 109 percent over its IPO value, at $94.25.
Despite its seemingly untenable string of successful quarters, many analysts remain very bullish on the stock. BGC Partners analyst Collin Gillis likes the comapny, and pegs LinkedIn to announce an increase of 15 million users over the prior quarter to bring their total user base to 240 million. In a reserach, RBC Capital Markets snalyst Mark Mahaney enthused "LinkedIn is firing on all cylinders... (their) fundamentals are the strongest of any large-cap Internet stock." And Wunderlich raised thr price target on the stock from $205 to $225.
Of 29 analysts surveyed by NASDAQ, all 29 held at least a "hold" rating on the stock, with 15 giving the stock a "strong buy."
Prior to the Q2 2013 earnings announcement, the stock was up .6 percent on the day and 79.82 percent on the year to hit $203.79 a share. The stock experienced a slight correction in May following the Q1 2013 earnings report due to (at the time) pessimistic expectations for the rest of the year.
LinkedIn made it nine quarters in athat they beat analyst expectations, but this good news was tempered by a gloomy outlook going forward. The company appears to be nearing saturation with white-collar workers in the US, and needs to expand more aggressively into other markets or make their site more of a "media destination" to spur growth. That is, the company needs some kind of news feed, or blogging function, to get users to check in more frequently.
62 percent of their total revenue currently comes from customers in the US.
LinkedIn had net income of $44.5 million, or earnings of $0.38per share on revenue of $363.7 million, compared to the prior-year period during which the company made $18.1 million, or $0.16 per share. Analysts had expected earnings of $0.31 per share on revenue of $354 million.