T = Trends Might Support the Industry
In regards to employment sites, LinkedIn has essentially taken over the industry. Therefore, unless something unexpected happens, trends will always favor LinkedIn. As far as social networking sites go, there is more excitement than substance at the moment, but LinkedIn doesn’t fall into this category anyway because it has figured out a way to monetize successfully. Another important note is that 30 percent of job viewers are now from mobile platforms. As mobile continues to grow, so will the number of Internet users, which will lead to more visits for LinkedIn. The biggest potential negative is a trend change in the stock market. Investors would flee LinkedIn at a rapid rate.
Up until this point, finding substantial negatives in this story would be nearly as challenging as finding millionaires living in Cabrini-Green in the 1970s. While the future is bright for the company, only positive news has been priced into the stock. This has led to the stock currently trading at 905 times earnings. That’s 1999-ish. The stock is also trading at 84 times forward earnings. It’s possible that insiders know the stock has gotten well ahead of itself, considering there has been consistent insider selling. In addition to that, there is a 7.30 percent short position on the stock. More than just insiders are well aware of the stock being too expensive. Another simple negative is weak margins.
It’s very possible that the stock will continue to climb higher for several months, perhaps even years, but it’s just creating its own bubble. For those who like to ride the wave, it might be a nice wave to catch as long as you bail at the right time. For those who want a long-term investment without having to worry, look for a slower and steadier wave.
LinkedIn is a WAIT AND SEE.
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