LinkedIn is scheduled to release its next earnings report on July 30, and consensus estimates suggest it will post earnings of 30 cents per share on $679.8 million in revenue. Barclays analysts have upgraded the social network, saying they think the issues that weighed on its first quarter earnings are “transitory” rather than “structural.
LinkedIn upgraded to Overweight
In a report dated July 15, analyst Paul Vogel and his team said they raised their price target for LinkedIn from $225 to $250 per share and upgraded the stock from Equal Weight to Overweight. They note that macro issues have become one of the big drivers of stock prices all across Wall Street, although some of those issues appear to have been resolved within the last week.
As a result, they think earnings estimates for many companies have been bumped up a bit. They note that the second quarter is typically seasonally slow, and they believe the second half of the year will have a greater impact than the June quarter report on earnings going forward.
LinkedIn’s issues just temporary
Despite their upgrade, the Barclays team doesn’t expect the June quarter results to be a catalyst for LinkedIn shares. However, they do believe estimates have been “reset appropriately,” as there could be upside to those estimates in the second half of this year and next year.
The analysts think LinkedIn inflicted the issues in its Talent segment on itself, but they don’t think those problems are long term. They do expect another “quarter or two” of negative impacts from the trends in the first quarter on the social network’s marketing services business. However, they still think demand for ads on the network is still high.
The Barclays team has also conducted some surveys around Premium Subscriptions, and the results made them more optimistic on LinkedIn’s opportunities in its Sales Navigator feature. They do expect the ramp of this service to be slow but steady, however, and are expecting higher revenue flow-through in the second half of this year and next than what LinkedIn management’s guidance implies.
Of course this shouldn’t come as a surprise because the company typically guides conservatively for the purpose of beating Wall Street’s expectations.