Sterne Agee analysts Arvind Bhatia and Brett Strauser maintain a Neutral rating for LinkedIn Corp (NYSE:LNKD) as they expect a 4Q13 beat and conservative 2014 guidance from the company in their earnings preview.
Analysts expect LinkedIn Corp (NYSE:LNKD)’s 4Q results to meet or exceed their above-consensus estimates and full-year guidance to be raised. However, analysts feel the current valuation (37x 2014E EBITDA or a 61% premium to the peer group) reflects this optimism. Reiterating Neutral on valuation.
An earnings conference call will be held at 5 PM ET. SAL revenue / EBITDA estimate of $439M / $110M is above consensus estimate of $438M / $107M and compares to guidance of $415M to $420M / $98M to $100M.
LinkedIn’s history of beating expectations
Over the last three quarters, LinkedIn Corp (NYSE:LNKD) has exceeded consensus revenue expectations by an average of 4% and adjusted EBITDA by an average of 14%. Analysts expect this trend to continue in 4Q13. Also, they note that over the last six quarters, LinkedIn has exceeded the midpoint of its revenue / adjusted EBITDA guidance on average by 7% / 22%, respectively.
In theory, if this trend were to hold, there is potential for LinkedIn Corp (NASDAQ:LNKD) to report revenue / adjusted EBITDA of $447M / $121M, or well above consensus. Additionally, over the last four quarters, LinkedIn has provided annual guidance that, on average, was 2% below the Street’s revenue expectations and 6% below the Street’s adjusted EBITDA expectations. If this trend holds, in theory, LinkedIn could issue 2014 Revenue / Adjusted EBITDA guidance of $2.12B / $548M compared to consensus $2.165B/$578M, respectively.
While fundamentally LinkedIn Corp (NYSE:LNKD)’s performance continues to be outstanding, analysts rate the stock Neutral due to valuation. Analysts note the stock currently trades at EV to EBITDA of 37x consensus 2014 estimates and 25x 2015 estimates. This compares to its peer group that trades at 23x 2014 estimates and 16x 2015 estimates.
Key 4Q Metrics to focus on
Analysts are looking for membership to increase to 279M, up 8% sequentially and up 38% y/y, which is similar to 3Q’s 38% y/y growth.