Are LinkedIn Investors Catching a Case of Facebook Fever?
In the first quarter, LinkedIn’s (NYSE:LNKD) net income surged 210 percent to $52.4 million. On a per share basis, the company earned 45 cents per share, beating expectations for 30 cents by a wide margin. Revenue jumped 72 percent to $324.7 million, also beating Wall Street’s consensus estimate for $324.7 million. Furthermore, the professional social network grew its member base to 218 million — an 8 percent increase sequentially, while its premium subscription revenue grew 73 percent to $65.6 million.
But following the release of the company’s earnings report after markets closed Thursday, shares — which had closed up 3.52 percent at $201.67 — crashed down as much as 10.15 percent to $181.20 in after-hours trading. With such a strong quarter, it seems a surprising that investors would bid the company’s stock down so drastically, at least at first glance. But the disappointing guidance LinkedIn gave for the second quarter likely prompted the sell off.
While analysts were prepared for second quarter revenues to come in at $358 million, LinkedIn guided between $342 million and $347 million. Management also said it expected adjusted EBITDA between $77 million and $479 million. For the full year, the professional social networked increased its revenue forecast to $1.43 billion to $1.46 billion and its EBITDA estimate to $330 million to $345 million. This lower-than-expected guidance prompted concerns among investors that the company’s efforts to boost mobile advertising will be slow to kick in, a similar hurdle that LinkedIn’s social network peer Facebook (NASDAQ:FB) has faced.
LinkedIn is working to add features and content that appeal to people who access the site from their smartphones; theoretically, the more time users spend on the site on their smartphones, the more advertisements they can see and more revenue can be generated. The company has revamped its mobile app and agreed last month to purchase Pulse, a service that enables users to read news on handheld devices. Yet, Raymond James analyst Aaron Kessler wrote in a research note seen by Bloomberg that mobile-ad revenue may not be increasing on pace with the transition to mobile computing.
It hasn’t been an entirely easy quarter for companies in the social media and technology sector, and their stocks have not performed well over the past few trading sessions. Facebook shares did manage to reverse their post-market losses after Wednesday’s earnings release, but Zynga (NASDAQ:ZNGA) and Groupon (NASDAQ:GRPN) have etched out losses in the past five trading days.
Despite the losses on the stock chart, LinkedIn’s revenue growth was significantly higher than Facebook’s. The social network reported Wednesday that total sales increased 38 percent over the three-month period, propelled upward by in the company’s mobile advertising revenue. One year ago — when Facebook was still private company — the social network did not show a single advertisement on its mobile platform, but as investors’ complaints about its mobile strategy have grown louder, the company has made concerted efforts to generate more money from the increasingly popular mobile form of its service. Wednesday’s results served to allay those fears to some degree.