Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Here’s Why LinkedIn Corp (LNKD) Is a Risky Bet

Page 1 of 2

Contrary to Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD) has more than doubled since its IPO. The online professional network has enjoyed good dynamics this year, too. Its stock is up 55% this year. There is one thing that LinkedIn shares with Facebook, and it’s the huge current valuation. LinkedIn is trading at a P/E multiple of 524, while Facebook Inc (NASDAQ:FB) is trading at a 2363 P/E multiple. Sure, stock market is about the future, but can LinkedIn Corp (NYSE:LNKD) live up to the investors’ expectations?

LinkedIn Corp (NYSE:LNKD)

What would fuel the necessary growth?

LinkedIn has three revenue sources: talent solutions, marketing solutions, and premium subscriptions. Talent solutions, which allows recruiters to find and attract prospective employees, is the biggest revenue source, accounting for 57% of total revenue. Marketing solutions, which gets money from ads, accounts for 23% of total revenue. Premium subscriptions, which offer additional options for interested users, make up 20% of total revenue.

The professional social network is competing with more traditional businesses, such as Monster Worldwide, Inc. (NYSE:MWW), that offer employment solutions for job seekers and recruiters. As talent solutions make more than half of LinkedIn Corp (NYSE:LNKD)’s revenue, the developments in this area would be crucial for the success of the company.

The target audience of Monster and LinkedIn intersect, but are not the same. LinkedIn is targeting a more sophisticated audience than the one of Monster Worldwide, Inc. (NYSE:MWW). In addition to that, LinkedIn is more about finding people who are not in active job search and offering them an attractive opportunity, while Monster Worldwide, Inc. (NYSE:MWW)’s service is based on job seekers who are actively searching for a job.

The fact that LinkedIn Corp (NYSE:LNKD) is targeting a more sophisticated audience would be a growth limiter for the company. There are a lot of jobs, especially in the small business sector, that do not demand their seekers a high level of networking and presentation skills. However, these jobs are crucial for the day-to-day business, and they need to be done. So I would not say that LinkedIn is changing the way every business hires employees.

On the marketing side, LinkedIn’s revenue is projected to grow 46% this year and reach $380 million. Facebook’s ad sales are projected to grow 38% to $5.89 billion. Given extremely high expectations, such level of growth could potentially disappoint LinkedIn Corp (NYSE:LNKD) investors.


Let’s turn to forward P/E instead of the current one. LinkedIn is trading at a forward P/E of 85 while Facebook Inc (NASDAQ:FB) is trading at a forward P/E of 30. These are all projections, and the companies still have to meet them. It would be extremely hard to do this for LinkedIn Corp (NYSE:LNKD). The current state of the world economy is a hurdle to job growth. The job market is sluggish almost everywhere, especially in Europe. While LinkedIn gets most of its revenue from job-related services, it would be hard for the company to overcome this trend. I expect the growth rates of LinkedIn to slow over time.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!