LinkedIn Corporation
(
LNKD
) is scheduled to announce its first quarter 2012 results on May 3,
2012; we see limited revisions to analyst estimates at this
point.
Fourth Quarter Recap
The company reported adjusted net earnings of 7 cents per share
in the fourth quarter 2011, much better than the Zacks Consensus
Estimate for a penny loss.
Revenues in the quarter were $167.7 million, up 105.3% from
$81.7 million in the fourth quarter of 2010. The growth is
attributed to higher premium subscription memberships that almost
doubled year over year and marked the third consecutive quarter of
subscriber growth. Moreover, the marketing programs and ad
targeting capability continued to drive revenues in the quarter.
All three revenue segments (Hiring Solutions, Marketing Solutions
and Premium Subscriptions) reported substantial growth.
The company reported operating income of $10.03 million, up
42.0% from $7.1 million in the year-ago quarter. Operating income
increased on the back of higher revenue increases than costs and
expenses.
Net profit on a GAAP basis in the fourth quarter of 2012 was
$6.9 million versus $5.3 million in the fourth quarter of 2010.
Excluding special items like amortization of intangibles, non-GAAP
earnings per share were 7 cents compared with 5 cents in the fourth
quarter of 2010.
Agreement of Analysts
Of the 12 analysts providing estimates for the first quarter,
only one revised upward in the last 30 days, with no downward
revisions. Furthermore, one analyst revised upward for the fiscal
2012 and 2013.
The analysts are of the opinion that LinkedIn is the leader in
the Internet-based professional networking business, which has
transformed the approach toward staffing and talent acquisition by
leveraging social networking over the Internet. Moreover, LinkedIn
operates in a relatively nascent market. This is a very big
advantage, as the company does not face competition. This should
enable it to grab a higher number of customers before the next big
professional network enters the market. Moreover, this advantage
will help the company grow exponentially over the next few
years.
Some analysts are of the opinion that the importance of
LinkedIn's demographics is threefold. First, LinkedIn has a large
portfolio of well networked members providing the much needed
support to its business model. Second, it is a win-win situation
for Linkedin as well as its members, as some of the members earned
substantial amounts as annual income through LinkedIn's membership.
Finally, LinkedIn comprises high quality members, which could
influence other LinkedIn members as well as enterprises and
professional organizations.
Magnitude of Estimate Revisions
Over the past 30 days, the Zacks Consensus Estimate for the
first quarter and fiscal 2012 increased by one cent to 2 cents and
24 cents, respectively. However, for fiscal 2013, estimates
remained unchanged at 54 cents over the last 30 days.
Our Recommendation
LinkedIn commands a leadership position in the emerging online
professional networking segment. The company has attained worldwide
popularity and has grown steadily over the last few quarters.
LinkedIn reported impressive fourth quarter numbers, and witnessed
considerable revenue upside across all the segments. The company
did particularly well in the Hiring Solutions segment (up 136.2 %
y/y).
The company reported consistent top-line growth, and effectively
implemented certain cost control measures to improve its bottom
line. Currently, competition is not severe in the professional
networking space, but IT majors like
Facebook, Google
(
GOOG
) and
Microsoft
(
MSFT
) are expected to enter the market soon. Hence, the competitive
scenario could change rapidly over the next few years.
LinkedIn is a Zacks #2 Rank, implying a short-term Buy
rating.
GOOGLE INC-CL A (
GOOG
): Free Stock Analysis Report
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LNKD
): Free Stock Analysis Report
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MSFT
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