LinkedIn Earnings Are Strong, But Weak Guidance Sinks the Stock

Linkedin

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The future does not look so bright for LinkedIn (NYSE:LNKD). The professional social network closed Thursday’s regular session up 4.39 percent at $223.76 per share but fell as much as 11 percent in post-market trading after reporting fourth-quarter and full-year earnings that didn’t quite give investors what they wanted.

The earnings picture was actually all right: fourth-quarter revenue increased 47 percent on the year to $447.2 million, beating the mean analyst estimate of $437.84 million; adjusted earnings increased 11.4 percent on the year to 39 cents per diluted share, beating the mean analyst estimate of 38 cents. Adjusted EBITDA came in at $111.4 million, up 41.7 percent on the year — however, as a share of revenue, EBITDA fell from 26 percent to 25 percent.

For the year, revenue increased 57.2 percent to $1.53 billion, just barely beating out the mean analyst estimate of $1.52 billion. Adjusted earnings increased 80.9 percent to $1.61 per diluted share, in line with the mean analyst estimate. Full-year adjusted EBITDA increased 68.6 percent to $376.3 million.

It’s the guidance that triggered the post-market selling. LinkedIn guided first-quarter revenue in a range between $455 million and $460 million, the high end of which is below the current mean analyst estimate of $470.27 million. Adjusted EBITDA is expected in a range between $106 million and $108 million, about 23 percent of revenue. For the year, revenue is expected in a range between $2.02 billion and $2.05 billion, below the current mean analyst estimate of $2.16 billion. Full-year adjusted EBITDA is expected to be approximately $490 million,  or about 24.4 percent of revenue.

“Solid fourth quarter performance capped another successful year where improvements in scale and relevance across our platform led to strong member engagement,” said Jeff Weiner, CEO of LinkedIn, in the earnings release.

Some of LinkedIn’s engagement metrics also raised concerns among investors. Total members increased 37 percent on the year to 277 million, but total unique visitors increased just 5.3 percent on the year and fell 2.1 percent sequentially. Likewise, total page views increased 8.2 percent on the year to 10.6 million, but fell 8.6 percent sequentially.

All told, though, the company looks strong — perhaps just not as strong as investors had hoped for. Revenue growth has decelerated to about 40 percent (down from around 80 percent this time last year), but EBITDA as a share of revenue has remained fairly constant around 25 percent. Importantly, all of LinkedIn’s major products — talent solutions, marketing solutions, and premium subscriptions — are pulling their weight. None has experienced a meaningful decline in the share of total revenue they account for, meaning that all are growing essentially in lockstep.

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