Shares of LinkedIn were down 6% on Friday after the company projected a weaker-than-expected revenue outlook.
Nonetheless, the company's fourth-quarter results beat Wall Street's estimates and shares are 69% higher than they were 12 months ago and more than double what they were in 2011.
But, with shares down 10% in the last two months, is it time to buy or does LinkedIn still have more downside ahead?
(See: CNBC's Social Media coverage)
"It's clearly a very expensive stock," says Pat Dorsey, Director of Research at Sanibel Captiva. "Expectations are incredibly high."
However, according to Dorsey, LinkedIn has something other social networks don't: an audience that is very dependent on the service.
"They have done a better job of any other social networking company of monetizing that user base," says Dorsey. "The real reason is because switching costs are incredibly high. If, let's imagine, a Facebook competitor showed up and you went over there, you might miss pictures of your neighbors puppy that just came on board. That's not a big deal. If you left LinkedIn, you might miss a job offer. That's a much bigger deal."
Plus, LinkedIn is also good deal for one key segment, recruiters.
"About half their revenue comes from recruiters," says Dorsey, "who find it a much faster and more efficient way to find good talent than posting boards like Monster."
Nonetheless, the company's valuations are too high, thinks Dorsey. LinkedIn price is 62 times this year's expected earnings. That's almost twice that of Facebook and four times that of the overall benchmark S&P 500 index.
"It's a wonderful, wonderful business," says Dorsey, "[but] very expensive right now."
Jeff Tomasulo, Managing Partner of Belpointe Alternative Investments, says there are some bearish signals on the chart. He notes that the stock is now testing a key support level at $200 per share but he also sees another sign of worry.
"It broke its 200-day moving average, which is never a good thing," says Tomasulo. "It's always a bearish kind of term."
And, a break below $200 could be even worse for the stock.
"That's going to be key," says Tomasulo. "If we break that, we can see more downward momentum going forward."
To see the rest of the discussion on LinkedIn with Dorsey on the fundamentals and Tomasulo on the technicals, watch the video above.
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