LinkedIn Corp (NYSE:LNKD) has been a darling on the markets ever since its IPO a couple years’ back, and it has beaten all analysts’ expectations every single quarter, including the most recent one. However, during Friday’s trading, the stock has gotten battered and beaten for one of the few times since the IPO, and the suggestion is that the company game weak guidance on the current quarter, which was weaker than some pessimistic analysts might have forecast.
The news overall wasn’t just good for LinkedIn Corp (NYSE:LNKD), they would be considered blockbuster. Earnings by the company quadrupled over the same period a year ago, and overall revenue doubled. So why is the stock down 10 percent on the basis of hose news?
And if the entire market is selling on LinkedIn Corp (NYSE:LNKD), why is CNBC’s Jim Cramer so darn bullish in the wake of all the red numbers on the board?
Simple overreaction, he said Friday.
“I have here, in my hand, a 15-page brief in favor of a fabulous forward look for LinkedIn,” Cramer said, “and there are two lines, two lines in this conference call that have destroyed this stock today. And I say that they (LinkedIn executives) are doing ‘UPOD’; This is UPOD.
They are underpromising, and they will over-deliver. I want to buy LinkedIn. … This is the only negative. Page after page after page (of good). I refuse to be tied down by that one line. I like LinkedIn.”
So there you go. It’s important to point out that from a valuation standpoint, LinkedIn is actually around one-fifth as expensive as social media rival Facebook Inc (NASDAQ:FB), and while they operate in different spectrums of the digital world–the former’s career-oriented while Facebook is more socially minded–there’s simply no explanation why investors should favor FB so much.
A valuation discount like LinkedIn Corp (NYSE:LNKD) currently has against Facebook would be warranted, if, for example, it had a higher dependency on advertising dollars to meet its total revenue expectations, but in fact, the opposite is true. It’s estimated that about 85% of Facebook’s revenues come from ads, while 30% of LinkedIn’s are derived from the medium.
Does this make logical sense? No, so it’s easy to agree with Cramer here. Mr. Market should be a buyer, and retail investors shouldn’t let short-term fear drive their behavior.
Are you a “one-liner” when it comes to LinkedIn Corp (NYSE:LNKD), or are you a big-picture investor who sees the growth in the company and the stock? Are you a buyer or seller of LinkedIn? Give us your thoughts in the comments section below.
See Cramer’s comments in video form on the following page: