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LinkedIn Corporation Message Board

  • investora2z investora2z May 12, 2013 7:59 AM Flag

    Valuations are expensive

    The crash from $200 to $175 was on huge volumes, and after brief calm, the fall seems to be gathering a little momentum. The next stop could be much lower as the guidance by the management is not very robust. Importantly, the stock has been trading at strange valuations (like Facebook), and it is impossible to justify the current price if it is not supported by tremendous growth. The guidance for the next quarter growth was only 5.5% sequentially. The current EPS is only $0.26 on a ttm basis and P/E is obviously unreasonable. Comparing with Facebook may provide some solace but the fact is that a price to sales of 17 on a net margin of less than 4% seems to be pretty high. In hindsight (the perfect vision) the price of $200 may seem atrocious for such earnings even if one factors much greater growth. So it is quite possible that $200 may not be seen in quite a while. So these are not the times to catch or hold on to this falling knife. However, strange things do happen in stock markets and one can expect miracles, but it will not be easy. Perhaps stocks like Facebook and LinkedIn had peaked at listing. While Facebook crashed and has been languishing since then, LinkedIn factored too much of future positives. In addition, there are those patent infringement lawsuits where big companies like LinkedIn are prime targets. In fact Bascom Research has filed a lawsuit against LinkedIN, Facebook etc. Companies concentrate on building patent portfolios or single products to encash on the value of the technology. e.g. a small medical device company PLC Systems (PLCSF) recently got European patents for its only product RenalGuard. Future of LinkedIn stock does not look very bright. Hopefully, it will settle down after a bit of pounding and consolidate till the fundamentals catch up.

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    • LNKD has been basing since March within a range of $167-$201. There was one attempt to break out of that range. Right now it is at the low end of the range.

      If it breaks below $167 other than momentarily that might be cause for concern, but it could certainly move up from here and I suspect that would have more to do with market conditions than LNKD's valuation, which everyone knows is quite high. Much is riding on the Street's perception of the company, and that remains positive within the context of a bull market.

      Clearly I disagree quite strongly with your "falling knife" claim as the data suggests otherwise, and I also disagree with your contention that management is "not very robust" (note recent acquisition of PULSE) and that recent fluctuation in pps is a "fall . . . gathering a little momentum." On Friday, May 10th we did see a decrease in pps well within the trading range noted above, and that was accompanied by slightly above-average volume, but it is also true some with short positions are trying to sink the stock and that is the likely explanation for those phenomena. Suffice it to say that much of your thesis is absent support at this time, and that many may well see pps as a great buying opportunity.

      Sentiment: Buy

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