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LinkedIn Falls Late On Weak Q2 Outlook

LinkedIn (LNKD) blew past first-quarter revenue and earnings estimates, but shares fell sharply late Thursday after it issued weak guidance for the current quarter.

The professional social networking site earned 45 cents a share ex items — 200% above a year earlier and better than consensus estimates of 31 cents. It was the third straight quarter of triple-digit EPS gains. Revenue rose 72% to $324.7 million, nearly $8 million above views.

But LinkedIn sees second-quarter revenue at $342 million to $347 million, below consensus estimates of $359 million. It expects adjusted net income of $77 million to $79 million. Analysts had pegged $85 million.

LinkedIn has beaten the high end of revenue estimates by an average of $15 million since its IPO two years ago and has also soundly beat the high end of EPS. Analysts and investors grew accustomed to LinkedIn underpromising and overdelivering, as it did with Q1. But it has never issued a forecast below expectations until now.

LinkedIn fell 10.5% in after-hours trading on the stock market. During the regular session, shares rose 3.5% to a new high of 201.67. LinkedIn had climbed 76% in 2013 through Thursday.

LinkedIn raised full-year revenue guidance slightly to an average of $1.45 billion, up from $1.4 billion. Its earnings target was unchanged.

In a conference call with analysts after results, CEO Jeff Weiner spoke positively about new products and improvements in mobile. About 30% of users access LinkedIn via mobile devices, up from 27% in Q4 and up 19% from a year earlier.

Moreover, for the first time, its sales force is set up to begin selling ads on mobile platforms.

"We are focused on maintaining an accelerated pace of innovation and delivering value to members," Weiner said.

LinkedIn ended Q1 with more than 225 million members, up from 200 million at the end of last year. That 12.5% gain was better than Q4's 8% sequential growth.

LinkedIn has three sources of revenue. Its largest is Talent Solutions, which gets fees from companies and headhunters trying to find prospective hires. Revenue from this group rose 80% to $184.3 million, a slight slowdown from Q4's 90% growth but ahead of estimates. The group represented 57% of Q1 revenue.

Marketing Solutions, which sells ads, reported a 56% revenue gain to $74.82 million. That's a modest slowdown from Q4's 68% gain but also above views. It represented 23% of revenue.

Revenue from Premium Subscriptions, which charges users for extra services, rose 73% to $65.6 million, in line with views.

LinkedIn has been one of the most successful Internet IPOs of the past several years, up 340% since its debut two years ago. Others in the field include Zillow (Z), up 200% since its debut in July 2011 and Yelp (YELP), up 100% since its debut 14 months ago.

"LinkedIn's fundamentals are the strongest of any large-cap Internet stock," wrote Mark Mahaney, an analyst with RBC Capital Market, in a report ahead of the earnings release. "Further, our proprietary survey work highlights a growing brand awareness and a relatively high level of customer satisfaction among corporations."