LinkedIn Corporation (NYSE:LNKD) operates the world’s largest professional network on the internet with more than 120 million members in over 200 countries and territories. In May, the company’s IPO made its underwriters, including Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC), big winners as the two split a hefty $30 million IPO fee. LinkedIn’s stock traded at $80 in its May debut and hit a high of $109 in July, but have done little to provide hefty gains to current shareholders. Shares have been having trouble maintaing a price above $90. Will the company’s third quarter earnings put an end to this possible momentum stock?
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High flying momentum stocks like Netflix (NASDAQ:NFLX) and First Solar (NASDAQ:FSLR) come and go, but they often have a stronger performance than LinkedIn’s current run. After Thursday’s closing bell, LinkedIn reported a third quarter loss of $1.6 million (2 cents per share), compared to a profit of $915,000 (2 cents per share) last year. On the positive, revenue for the professional network company increased from $61.8 million to $139.5 million. Despite the third quarter loss, the results still beat estimates.
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In a statement, LinkedIn Chief Executive Jeff Weiner said the company’s results “underscore the long-term strength of our global platform and our business model.” Furthermore, the company expects to report EBITDA for the current year in a range of $83 million to $85 million, a sharp increase compared to its previous $65 million to $70 million estimate.
When it comes to momentum stocks, any kind of disappointment can become a huge headwind for shares. This is the case with LinkedIn. In extended trading, shares plummeted more than 10%, as investors were unable to ignore a plan by the company to offer a secondary stock offering, which would dilute share value. The WSJ reports, “The company didn’t say how much stock it plans to sell, but LinkedIn did say it will use proceeds from the stock offering to “working capital and general corporate purposes, including expanding its sales force, capital spending and perhaps for deal making.” For now, LinkedIn is a wanna be momentum stock.
Competitors to Watch: Google Inc. (NASDAQ:GOOG), Pandora Media Inc (NYSE:P), Yahoo! Inc. (NASDAQ:YHOO), Zillow Inc (NASDAQ:Z), Monster Worldwide, Inc. (NYSE:MWW), Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and News Corporation (NASDAQ:NWSA).
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