LinkedIn stock rises nearly 7% to record price

Analysts remain bullish on stock, placing price targets around $200

Financial trends and news by Steven Loeb
February 27, 2013
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 In a recent piece I wrote, I looked at a number of companies that had gone public in 2011 and 2012, to see if those stocks were rebounding. Looking at Facebook, Zynga, Pandora, Trulia, Zynga and Yelp, the answer was, for the most part, that they were not.

There is always one exception that proves the rule, though, and in this case it was LinkedIn. While those companies were seeing their stocks either still trading below IPO price, or attempting tp rise in a still trepidatious market, LinkedIn was seeing record numbers for its shares, which have only continued to rise. 

LinkedIn stock hit an all time high of $169.85 Wednesday, before coming down slightly to finish regular trading up 6.83%, or $10.78, to $168.55. This is LinkedIn's highest closing price since it went public in May 2011.

The reason for the record breaking price is being attributed to analysts from Evercore Partners and Wunderlich Securites, who both came out with bullish target prices on the stock on Wednesday.

Evercore Partners analyst Ken Sena upped his target price for the company to $200 from $160, while reiterating his buy rating, comparing LinkedIn to software-as-service providers SalesForce, Workday and ServiceNow.

"The anticipation stems from work performed with our Enterprise Software team, led by Kirk Materne, where we compare LinkedIn's business to several higher-multiple software peers (e.g., Salesforce.com nearer its IPO, Workday, and ServiceNow)," Sena wrote. "We conclude that on the basis of business mix, revenue growth, gross margins, and OCF, LinkedIn is worthy of comparable value, which would argue further multiple expansion."

Salesforce, which went public in 2004, was trading at 12 times its revenue a year after its IPO, while LinkedIn is trading at 10 times. 

"The similarities between LNKD and CRM include a predominantly enterprise-facing business model, consistent high double-digit revenue growth, multiple customer segments, large addressable markets, high gross margin and operating cash flow leverage, and a clear data advantage, suggesting strong moat characteristic," said Sena.

Wunderlich Securities initiated coverage of LinkedIn Wednesday, with a buy rating and a price target of $195. 

“The company’s Recruiter product and broader Talent Solutions platform have become extremely valuable for recruiters,” Harper wrote. “We view LinkedIn with a very large competitive moat around its platform given strong network effects, a highly visible revenue stream and the ability to rapidly innovate with new products.”

LinkedIn's quarterly earnings

In its most recent earnings report, LinkedIn posted non-GAAP earnings per share of 35 cents on revenue of $303.6 million, up 81% from $167.7 million in the year-ago period, and well above the consensus estimates compiled by Thomson Reuters of 19 cents a share on revenue of $279.5 million. As a result, its stock rose 10% in after-hours trading to  $136.75.

The stock soared 22% the next day to a then record high of $150.

Analysts were impressed with the new products delivered by LinkedIn during the year, which came from an accelerated product schedule.

"Rapid product innovation and high engagement drove upside to growth in all segments, and LinkedIn passed the 200M+ members milestone in the quarter. We expect shares to respond favorably to the better than expected 4Q results and solid 2013 outlook. We continue to believe LinkedIn is operating extremely well and has significant room for growth ahead driven by the secular shift toward enterprise hiring, expanded field sales efforts, and product innovation," Anmuth wrote.

Anmuth specifically cited what he liked regarding LinkedIn's report:

  • Over 2,400 corporate customers were added in the quarter
  • The average revenue per enterprise customer increased due to expanded recruitment product sales
  • Average CPMs rose due to strong Marketing field sales, while the online channel also delivered solid growth
  • Premium sales were 13% higher than he had estimated and that the company is seeing increased traction of Sales Navigator
  • EBITDA margin grew 369bps sequentially to 25.9%, driven by gross margins and leverage in R&D and G&A.

JP Morgan raised its projected revenue for the first quarter of 2013 from $206.5 million to $308.5 million. Full year revenue projections were raised from $1.412 billion to $1.441 billion.

(Image source: http://wearethepractitioners.com)

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