Professional networking major
) and online dating service eHarmony recently made public
announcements that some of their online user passwords were stolen.
Naturally, this resulted in growing concern among users, since
personal and professional identities could be at stake.
Although the professional networking major did not provide the
exact figure, the rough estimate of more than six million passwords
(between LinkedIn and eHarmony) looks bad enough.
Although the members pays more charges for LinkedIn only for the
SPEED at which it could grow earnings. A problem arises if it loses
its reputation due to this leakage of sensitive information, which
may affect its earnings going forward, often trigerring a
catastrophic selloff, which has happened a couple times in LNKD
share price history.
Here we consider the "
) for professionals" to be a great threat to LinkedIn paid services
and perhaps the best gauge for the behavior of FB in the
Over the last 18 months, the market has seen a number of
social-media IPOs which include
). But the recent incidence puts a question mark regarding their
ability to protect data as most of them deal with sensitive
LinkedIn caters to more than 160 million members, which means
that it often contains confidential information related to job
seekers. Additionally, companies, recruiting services and others
have accounts alongside individuals who post resumes and other
professional information. Leakage of this information may result in
business loss for them.
Although the LinkedIn promoter is on the board of Facebook, we
believe that Facebook is well positioned to grow over the long term
based on its large customer base and proven business model. The
company enjoys a first mover advantage in the social networking
Although advertising revenue has somewhat slowed down in recent
months, we note that non-advertising revenues increased fivefold in
2011. Nonetheless, information protection remains a concern for
Facebook as well.
For LinkedIn, the macro economic outlook remains uncertain. The
slowdown in Europe has adversely impacted the company's business
with no relief expected in the near term. Management expects
another recession in 2012.
We have a Zacks #3 Rank on LNKD shares, which translates
into a short-term Hold rating.
FACEBOOK INC-A (FB): Free Stock Analysis Report
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LINKEDIN CORP-A (LNKD): Free Stock Analysis
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