In the last few years, growth of social media has overwhelmed people across the globe to such an extent that everyone from big business houses to small scale investors is trying to reap some benefit by participating in the tide. It is extremely difficult for any player to just rush into the space and establish its business among the likes of Facebook Inc (NASDAQ:FB) and Twitter. However, LinkedIn Corp (NYSE:LNKD) is one such company that has astutely carved out a niche market for itself and created immense value for its shareholders.
A brilliant quarter
For the second quarter of 2013, LinkedIn Corp (NYSE:LNKD) saw an increase of 37% y-o-y in cumulative membership to 238 million; the first ever increase since its IPO in 2011. As a result of greater engagement, the company raked in revenue of $364 million, which translated into non-GAAP EPS of $0.38. The strong performance is also to be attributed to launch of several new products in the quarter around Marketing and Talent solutions. LinkedIn Corp (NYSE:LNKD) has shown considerable mettle in the social media space that is visible in a massive gain of 140% in its share price over the last 12 months.
The company knows the most important part — Good products
The employment crisis prevailing in countries across Asia and Europe benefited LinkedIn Corp (NYSE:LNKD) as more and more people got on-board during the quarter to look out for opportunities. As reported, approximately 65% of its members are outside of the U.S. Besides this, the launch of relevant and innovative products throughout the quarter secured greater customer engagement.
The company released various products with the sole motive of making things convenient for its users. May it be the LinkedIn Contacts, which makes it easier for users to track meaningful conversations or empowering members to add rich media content to their profiles, LinkedIn has adopted the right strategy to survive in this industry — consistent innovation.
As per analysts, LinkedIn Corp (NYSE:LNKD)’s PEG ratio on a five year forecast is around 2.6, which makes it a reasonable buy as compared to its peers. I say this is a justified valuation keeping in mind that the company is still very young and has a plethora of growth opportunities ahead. Also, the way it is investing money and efforts in innovation, it is sure to pay off handsomely in near future. The company also saw a commendable increase of 68% in revenue from premium subscriptions, which testifies the excellent quality of its offerings.
Facebook is back in the game.
LinkedIn Corp (NYSE:LNKD)’s shares rose quite a bit after Facebook Inc (NASDAQ:FB) declared stronger than expected results for the second quarter of fiscal 2013. The share price of Facebook Inc (NASDAQ:FB) has climbed back to its IPO levels, a laudable feat after investors had shunned the stock because of an unnecessarily high valuation. The company posted EPS of $0.13 on revenue of $1.81 billion as compared to a loss per share of $0.08 on revenue of $1.18 billion in the year ago period.
Its recently launched feature Graph Search has the potential to become a dangerous threat to LinkedIn as users are using it vigorously to establish professional connections and recruiters are using it to find the best candidates.
It is evident that Facebook Inc (NASDAQ:FB) is trying every measure possible in order to engage users on the website. Moving ahead, the company will be banking heavily on these new products to get more people on-board. I believe Facebook Inc (NASDAQ:FB)’s share price will successfully sustain the momentum because of the stupendous growth in mobile ad revenue and frequent launch of new products/features.