) shares are up by 20% after the company announced its Q4 2012 and
full year results. The company has reported exceptional growth
across almost all metrics including revenue growth, user base
growth, international expansion and user engagement. This is likely
to ensure that the stock will continue to trade at high levels in
However, as LinkedIn heads into 2013, the growth from sheer user
base expansion is going to slow down, and the company will have to
shift its focus on increasing user engagement and better
monetization of its platform. LinkedIn is already doing that and
launched numerous features during the fourth quarter. The
opportunities from job postings, premium recruiter subscriptions as
well as individual professionals and sales tools such as its ales
navigator feature are immense. Given the continued growth and
recently released results, we are in the process of updating our
price estimate for LinkedIn.
See our complete analysis for LinkedIn
Snapshot Of Q4′s Growth
LinkedIn saw growth across all its business segments and key
metrics. The overall revenues grew by 81% with the highest growth
coming from LinkedIn's talent solutions segment (~90%). This
segment includes revenues from job postings as well as recruitment
services under which LinkedIn charges companies and provides them
with premium recruitment tools and search capabilities. Even though
the growth across other business segments such as premium
subscriptions and marketing solutions was quite high, there is
clear evidence that LinkedIn has a big opportunity to become a
market leader in talent hiring industry.
The talent solutions business constitutes roughly half of
LinkedIn's value as per our estimates. As far as job postings on
LinkedIn are concerned, they are increasing rapidly. In month of
January alone, job postings (at any given time) increased from
close to 160,000 to over 200,000. This happened despite the launch
of Facebook's (
) social jobs.
We believe that the company has a tremendous opportunity with
job postings if it continues to execute well. A market for 3 to 6
million monthly job openings exists worldwide currently and there
is significant upside potential to our price estimate if LinkedIn
can tap into even a quarter of this market opportunity (see
What's LinkedIn's Opportunity In The Job Postings
Conventional revenue streams such as advertising and
subscription benefited from a growing user base as well as
increased user engagement leading to higher number of page views.
Including Slideshare, LinkedIn's unique visitors averaged 155
million in Q4 2012. That's a big number on which the company can
LinkedIn is witnessing the success of its mobile app as roughly
20% of the job views and close to 30% of job viewers were on mobile
in the fourth quarter. However, this implies that people are not
browsing as much on mobile and that could perhaps weigh on the page
view per user growth in the future.
As far as LinkedIn's sales navigator product is concerned, the
company stated that it is still in the early stages and there is a
long way to go. However, if we assume that LinkedIn can get close
to 100,000 customers signed up for Sales Navigator in next 2-3
years, it can add an incremental $50 million in annual revenues.
Furthermore, if the company can garner 1 million such customers by
the end of our forecast period, it can lead to $500 million in
additional revenues. The opportunity is there!
Overall, LinkedIn seems to be blowing past growth expectations
every quarter. But the question remains - how long will this
continue? As soon as the growth falls, it is going to impact the
stock and this is one risk that investors should be aware of. The
company is doing great and is likely to continue its fast paced
growth in near term. But we believe a lot of its current market
value is hinged on continue high growth and any slowdown will not
be well received. In addition to this, sales and marketing
costs as well as R&D costs remain a concern and competitive
risks may not be priced in.
We are currently revising our price estimate, which stands well
below the market price.
How a Company's Products Impact its Stock Price at