I dont disagree in any way about LNKD's potential in the future. Its the strongest social media biz model out there. What I struggle with is valuation. This company is has a markt cap of ~20bill. Compare that to YHOO which has a market cap of 28 bill.
LNKD has said its focus is to move to more of a content type site. As far as Im concerned YHOO is as succesful a content based site as there is out there. If LNKD could grow to YHOOs size in a few years Id say the company is hugely succesful. I also have no doubt management is capable of it. So say they do that and then this company is worth somehwere around 30bill. Thats roughly a 50% return, which is great. But, in my view that would require optimal execution by LNKD and no outside factors hurting their shot at growth.
The downside is if there are hiccups and LNKD simply is a very succesful company but cannot grow its revenue to match an internet major like YHOO. In that case I think the downside is much sharper.
My basic reason for being short is that so much good news is baked into this company's price already. If they execute perfectly I still see the 5yr upside limited. From an optionality standpoint, short seems to be the way to play it.
You are comparing Yahoo market cap to LNKD? Just to let you know during the hay days, Yahoo was also trading at $500 - $700 with market cap a lot higher than LNKD's $20B today. Yahoo shares have split 5 times, Sept 97, Aug 98, Feb 99, Feb 2000, and May 2004. In 2000, Yahoo's market cap was $132 Billion, and 2004 it was $45 Billion. Get your facts straight before posting. LNKD is in early inninngs of hyper growth in the coming years. Before the next earnings in August, LNKD will be trading over $230. Mark this post !
Sentiment: Strong Buy
Funny thing you should mentioned YHOO.
Jeff Weiner, Lnkd's CEO was in charge of Yahoo search and damn near destroyed YHOO from the onslaught of google's challenge. Weiner was also in charge of the acquisition of leading photo sharing website Flickr and destroyed it.
Now, he's suddenly the visionary at LNKD ? Hello ?
LNKD is nothing but a 3 Billion SPAMs a week website. The entire job/hiring marketsize is about $3 Billion, when you add up Monster,Careerbuilder, LNkd, dice, Ladder, etc. No one cares about the SPAMs from Lnkd.
Who cares about Joe Blow's work anniversary, new contacts, etc ?
Lnkd is a garbage site for other than recruiters.
LNKD made 23 cents EPS Q1 of 2013. So calendar 2013, the EPS will be close to $1.10? With a 50% growth rate, let's be overly generous an assume an increase in margins, EPS for 2014 will be $2/share. That's a PE of 90x 2014 earnings. That's with flawless execution. Right now for 2013, a PE of 180 is just too unrealistic. The problem with LNKD is that it's going to hit a wall. People say LNKD is more than a social media site... well it has to be since LNKD is the least social site of any "social media site". When you want to post a picture or see what your friends are up to or send a message, you use FB or twitter. The only people looking at other people's LNKD profiles are marketers or recruiters. And if you want to know the margins on a job posting/recruiting business, look at Monster's financials, it's no secret, they're lousy.
It's just like Groupon, LNKD has a ton of people on the sales team selling the job posting/recruiting side. Sure the top line will grow, but the bottom line will not. Because there's a ton of money going to the commissions of the sales team. Like GRPN, it's a broken model. Once people realize this, prepare for a GRPN like drop then recovery then drop. This is going to be an awful remainder of the year for LNKD. When the macro market drops, expect a high downward beta for LNKD.
A considered position and reasonable. Because I am long I hope you're wrong in your estimation, but there is more than a little chance you are correct. LNKD's management does have to make all the right moves in the future. So far, so good. Steady as she goes. Good luck with your investments.
PS - Note my recommendation is "Buy," not "Strong Buy." It reflects my belief that caution is needed.