LinkedIn Corp (LNKD)’s Strong Growth Trajectory

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LinkedIn Inc.

Editor's Note: This article was originally written before LinkedIn's latest earnings release.

With the stock price of LinkedIn Corp (NYSE:LNKD) up almost 70% year-to-date and a sky high P/E in excess of 1300, one would think that the company is fairly valued, if not overpriced. However, LinkedIn Corp (NYSE:LNKD)'s growth potential remains largely untapped, even with three different revenue streams that separates the company from other Internet business models which are heavily reliant on advertising revenues alone.

Strong growth trajectory

LinkedIn Corp (NYSE:LNKD)'s professional networking platform managed to sign up a solid number of users with more than 202 million members, and still has a large addressable market share around the world. The company did state that it views it addressable number of users at roughly 600 million, which is the number of knowledge workers or professionals across the globe.

And the company's growth trajectory seems rather solid, as it grew 86% in 2012 and ended the year with top-line revenues of $972 million. However, the company's net income margin is a paltry 2.2%, thought it is widely expected to expand substantially in the near-to-medium term. And LinkedIn's management has painted a solid picture of the company's revenue generation abilities by laying out its revenue expectations of more than $1.4 billion for the full-year 2013.

LinkedIn Corp (NYSE:LNKD)'s business segment seems to be doing well, as the company signed up more than 2400 new corporate customers in the last quarter as it becomes a more prominent place to network and for recruitment. The subscription revenues business of LinkedIn did pretty well, as it gets more and more sales and business development professionals to pay for enhanced services on LinkedIn's platform.

LinkedIn's online advertising business represents an untapped revenue source for the company, as it earned only $258 million from advertising in 2012. While its early stages, there is substantial room for growth as competitors like Facebook (NASDAQ:FB) and Google earn exponentially higher revenues from online advertising. LinkedIn Corp (NYSE:LNKD) did see an uptick in the number of advertisers for certain products, and this trend should continue as the company realizes its full potential.

Gaining more customers

LinkedIn's key driver has been the recruiting dollars that companies pay to list job ads. This business segment made up ~54% of the company's total revenues, and is the one that is expected to grow faster as well. LinkedIn has been gaining more corporate customers, as its lead competitor Monster Worldwide, Inc. (NYSE:MWW) struggles to gain revenues and market share. In the last quarter, Monster's revenues declined 13% and net income declined 61% on a year-over-year basis. And Monster's CEO stated that the company is still on the look-out for a prospective buyer, which sparked a massive sell-off for the shares of Monster Worldwide, Inc. (NYSE:MWW).

LinkedIn continues to gain share from Monster, and it seems pretty evident that Monster Worldwide, Inc. (NYSE:MWW)'s partnership with Facebook hasn't gained traction at all. As LinkedIn becomes a more notable outlet for recruiting, the company will be able to increase prices from corporate clients, most of whom are more than willing to pay extra for premium services.

User engagement and mobile presence

Thanks to a number of new product introductions and innovations, LinkedIn's user engagement levels have seen an uptick in the last quarter and places it amongst the most visited websites in the world. The company now ranks as the 25th most visited platform across the globe, and increased product innovations has increased its quarterly page views on desktops to 9.8 billion. As more and more first time users sign up for LinkedIn Corp (NYSE:LNKD) and other individual revisit the site, the platform's engagement will increase.

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