Despite LinkedIn Corp (NYSE:LNKD) forecasting a weaker-than-expected current quarter, Wall Street analysts raised their price targets.
Since going public in May 2011, LinkedIn Corp (NYSE:LNKD)’s actual results have met or exceeded the Street’s consensus expectations every quarter.
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LinkedIn Corp (LNKD) Shares Fall
LinkedIn Corp (NYSE:LNKD) shares fell 10 percent on Thursday after the company provided a weak Q2 guidance. However LinkedIn’s financial results for the first three months of the year blew past analysts’ estimates. This marked the eighth consecutive quarter the company topped Wall Street targets.
LinkedIn Corp (NYSE:LNKD)’s executives suggested that a revamped mobile app and other new products designed to keep smartphone users engaged would not deliver on advertising growth as quickly as anticipated.
Despite the cautionary note from LinkedIn, Wall Street took a long-term view on the company’s prospects on Friday. At least six brokerages including JPMorgan, BMO Capital Markets, Wedbush Securities, Cantor Fitzgerald, and Canaccord Genuity raised their price targets.
Wedbush Equity Research in its report raised LinkedIn Corp (NYSE:LNKD)’s price target to $195 by maintaining a neutral rating on the company. Wedbush notes LinkedIn’s total revenue of $325 million beat consensus estimate of $317 million. Talent Solutions and Premium Subscriptions drove the beat, and more than offset marketing weakness. Wedbush observes LinkedIn was able to post Non-GAAP EPS of $0.45 compared to consensus of $0.31 primarily through top-line beat and cost control and partially to the timing of new hires.
Wedbush analysts feel the weaker-than-expected Q2 guidance reflects increased spending that should drive long-term growth but implies near-term compression. The analysts feel based on FY13 guidance, LinkedIn shares will trade at 14x consensus revenue estimates, over 60x adjusted EBITDA guidance, and well over 100x consensus EPS estimates. Wedbush feels these metrics suggest that investors believe the company has the potential to grow to several times its current size.
Wedbush analysts maintained Neutral rating, but raised the price target to $195 from $140. In the analysts’ opinion, their price target reflects a P/E multiple of about 75x their CY:14 EPS estimate of $2.60. They feel this multiple averages their EPS growth expectations for FY: 13 (over 100 percent) and FY:14 (up to 50 percent). The analysts believe the steep multiple is justified due to significant potential to deliver operating leverage from cost control, strong revenue growth, a large addressable market, and a dominant market position.
Michael Pachter and his team at Wedbush feel LinkedIn has only scratched the surface in terms of attracting Corporate Solutions customers, job seekers, and marketers. Besides the analysts feel the successful development of mobile apps and features should result in continued engagement growth as users migrate from the desktop to smartphones and tablets.
Interestingly, on Thursday’s call, management disclosed that the introductions of new Android and iOS apps two weeks ago increased likes and comments by 40 percent per unique user.
Besides five other analysts J.P. Morgan, BMO Capital Markets, Northland Capital, Cantor Fitzgerald, and Canaccord Genuity have all raised their price targets on the stock, by as much as $50. It is important to note there were no target cuts among brokerages tracked by Thomson Reuters.