Breakout

LinkedIn One Year After IPO: It’s a Screaming Buy Says Schoenberger

Jeff Macke
Breakout

Regardless of what you hear, Facebook (FB) wasn't the first huge social media IPO. Linkedin (LNKD) went public almost a year to the day before FB and with much better results.

At the time, LinkedIn was the biggest tech IPO since Google (GOOG), and closed it's first trading at mere $9 billion market cap. Shares priced at $45 last May 18th, and LNKD opened on the NYSE the next morning at $83 and closed at $94, a cool 109% gain for those who were able to get an allocation of shares at the offering price.

Despite LNKD's enormous relative success compared to Facebook, both in terms of financial results and IPO performance, Linkedin stock has been dragged down over the last few weeks by the undercurrent of the Facebook Titanic.

Todd Schoenberger of The BlackBay Group thinks the stock market has it all wrong. Schoenberger says LinkedIn has well balanced global breadth and obvious business model advantages over the traditional social biz model of gathering eyeballs.

Linkedin customers get in for free then start paying for help in optimizing their networking efforts. Schoenberger says premium (read: full-price) members get "tools for how to juice up your resume, career searches, what you can look for in an interview, what kind of questions you can expect;" basically everything except a confidence-building hug prior to the interview itself.

The strategy is working, at least in terms of growth rates. On May 3rd Linkedin destroyed analyst predictions, reporting non-GAAP EPS of $0.15 versus estimates of $0.09, also non-GAAP. Margins were up to 20% from 14% in Q1 2011. Revenue from premium members grew 91%, representing 20% of LNKD's top line.

Numbers like that are used as justification for jaw-dropping valuation multiples. Each user generates about $6 in revenue on average yet is valued at $104. The stock has a trailing PE of 694 and Price to trailing Sales multiple near 17x.

All of which Schoenberger waves off with a gesture similar to that one might use to bat away a gnat. Linkin is "like a religion" to corporate recruiters as well as job-hunters, he says. That allows LKND get paid on both sides of the buyer- hirer continuum.

As for the stock itself, the irrepressible (mouthy) trader would "buy it now even if it goes up 20% or down 20%. Buy it at any price at this point. It's a buy and hold; this is not a trading stock (regardless of it's larger than 100% range in one year)."

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