LinkedIn Corp (LNKD): The Bottom Line

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LinkedIn Inc.Social media websites have been a trending topic in investing circles over the last few years, as this relatively new medium has firmly established itself in most people’s social and professional life. Despite the industry’s soaring valuations, many investors have been eager to get in on this trend, propelling these stocks higher in anticipation of future growth.

While LinkedIn Corp (NYSE:LNKD) reported results that beat on the top and bottom line, the stock tanked on a disappointing outlook. This may provide an enticing entry point for those that are bullish on the stock.

Stock overview

LinkedIn Corp (NYSE:LNKD) operates the world’s largest online professional network, counting over 255 million users, providing members with a social platform to manage their professional identity on the web. It allows people to join professional networks, search for jobs, and find business opportunities.

The company has a market cap of $19.15 billion and a fairly volatile 1.89 beta. It’s up nearly 60% over the last twelve months, and has been a favorite for shorts in the past due to its enormous valuation.

Strong earnings, weak outlook

The company’s latest earnings report was a mixed bag for investors, as the company beat estimates but lowered its outlook. Revenue came in at $324.7 million, topping analyst estimates of $317.1 million. This figure was up a massive 72% year-on-year, showing that the company is capable of delivering impressive top line growth. The firm reported EPS of $0.45, which also beat the $0.31 consensus estimate easily, and was up from $0.15 in Q1 2012.

On the face of it, the report wasn’t bad at all, with record levels of revenue, profitability, and cash flow according to management. Revenue from Talent Solutions products grew especially fast, with an 80% increase. Revenue from Premium Subscription services increased 73%, representing some 20% of total revenue. Management reaffirmed its commitment to its operating priorities, diversifying the business, and investing aggressively in order to sustain growth, introducing a new version of search and developing its mobile business.

Like Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD) is increasingly trying to profit from mobile advertising, and saw fairly good growth in mobile use with 30% of unique visitors visiting the mobile app versus 19% a year ago. However, it still has a great deal of room to grow in this arena, earning only $258 million from ads last year.

However, the outlook substantially missed Street estimates, which is what caused the dramatic 13% sell-off on Friday. Versus a consensus estimate of $359.2 million in revenue for Q2, the company is now expecting revenues of between $342 million and $347 million. Full-year sales are expected to be between $1.43 billion and 1.46 billion, also coming in under the consensus. Yet, the company is still maintaining strong growth, and for those that are bullish on the stock, the drop may provide a perfect opportunity to get in.

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