Cantor Fitzgerald Equity Research analysts Youssef Squali, Naved Khan and Kip Paulson maintain a Buy rating for LinkedIn Corp (NYSE:LNKD) as the company is set to post strong 4Q results on Thursday.

LinkedIn Corporation

We expect LinkedIn Corp (NYSE:LNKD) to post strong 4Q results on Thursday, February 6, driven by a differentiated offering for professionals and what we view as a superior value proposition for recruiters and agencies. While we would expect to see upside to consensus estimates for 4Q, we also note that the magnitude of quarterly out-performance has diminished over the past few quarters, reflecting heightened Street’s expectations for this management team.

Expecting strong 4Q:13 results from LinkedIn

We expect 4Q to come in-line or slightly ahead of Street consensus (FactSet) of $438M in revenue and $138M in EBITDA, 44% Y/Y growth and 32% EBITDA margin (we’re at $429M/$103M, respectively). We note that Street estimates are already well ahead of guidance for $415-420M/ $95-100M in revenue and EBITDA, respectively. We expect $0.27 in NEPS vs. consensus’ $0.39.

Talent Solutions should benefit from increased market penetration

LinkedIn Corp (NYSE:LNKD)’s core Talent Solutions segment results should continue to see robust growth, benefiting from market share gains from traditional offline (executive search firms) and online players (Monster.com, CareerBuilder) and from strength in the professional services segment. We expect 1.8K new corporate solutions customers for a total of 23.8K, with segment revenues of $241M, up 50% Y/Y.

Marketing Solutions growth likely to be impacted by newsfeed ads

Management’s decision to transition to “sponsored updates” in the news feed is likely to keep 4Q growth for Marketing solutions in check, similar to 3Q. We’re modeling for $101.8M in segment revenue, up 22% Y/Y (vs. 38% in 3Q). The latest comScore data suggest that, excluding mobile, growth in user engagement slowed Q/Q, with page views up 10% Y/Y from 30% in 3Q. Longer-term, we expect the switch to Sponsored Updates to be positive to revenue growth in a similar way it was for Facebook Inc (NASDAQ:FB).

We expect member growth to be robust, reaching ~279M members by December 31, up 38% Y/Y. We estimate Premium subscription revenues will grow 45% Y/Y to $86M.

We expect 1Q to be in-line with current consensus, which stands at $470M for revenue and $107M for EBITDA. For FY:14, consensus is at $2,165M/$583M, respectively.

LinkedIn’s valuation and risks

LinkedIn Corp (NYSE:LNKD) is trading at 11.1x CY:14 revenue and 43.6x EV/EBITDA, toward the high end of the group, but which we believe is justified considering its growth/margin profile. Our FY:14 $260 PT is based on a 10-year DCF. Risks include weakening macro environment, reduced engagement, and increasing competition.