LinkedIn Corp (LNKD) Losing Steam In Near-Term: Citi

LinkedIn Corp (NYSE:LNKD) shares returned a whopping 86% in 2013 amid solid all-around growth. But Citi Research is cautious about the professional networking giant’s fourth quarter results. Analysts Mark May and Kevin Allen said in a research note that LinkedIn Corp (NYSE:LNKD)’s key data points suggest that the company’s growth may be slowing.

LinkedIn’s growth slowing?

The analysts track two important metrics: total number of jobs posted on LinkedIn Corp (NYSE:LNKD)’s website and the number of companies hiring on the site. Data about these two factors posted on the company’s website gives an almost accurate understanding of intra-quarter trends. Over the past several quarters, these two factors have had 99% correlation to LinkedIn Corp (NYSE:LNKD)’s revenue from the hiring solutions division. This business unit alone accounts for 57% of the Mountain View-based company’s total revenue.

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For the fourth quarter ending December 31, the analysts found that the number of job postings on the company’s website rose 64% YoY. That’s lower than 83% growth in Q3, 83% in Q2 and 91% YoY in the first quarter. The number of companies hiring on LinkedIn Corp (NYSE:LNKD) rose 46% in Q4. That’s well below the 49% growth in Q3, 54% in Q2 and 55% in Q1.

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Recent updates may help LinkedIn

The historical correlation of these two metrics with the revenue of the hiring solutions unit suggests that Q4 revenues will be in-line with the consensus estimate in the best case scenario. That means hiring solutions revenue should come at around $249 million. It may trigger a near-term underperformance in the stock, says Citi Research. But LinkedIn Corp (NYSE:LNKD) recently improved its marketing solutions business by launching Sponsored Updates. So, it may offset the softness in hiring solutions.

Though Citi Research is bullish on LinkedIn Corp (NYSE:LNKD)’s fundamentals and its management, it has a Neutral rating on the stock. That’s because of its valuation of 10x estimated revenue for 2015.

LinkedIn Corp (NYSE:LNKD) shares plunged 3.94% to $208.22 at 11:49 AM EST.