LinkedIn is scheduled to release its next earnings report after closing bell. The social network impressed Wall Street with its last set of earnings results, but some analysts don’t think that will happen again. The stock prices of several companies have plunged recently thanks to weak earnings guidance for the current quarter and fiscal year.
At least one firm is warning about LinkedIn’s 2015 guidance and has downgraded the company’s stock going into tonight’s report
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BGC downgrades LinkedIn
The strengthening of the U.S. dollar has plagued most U.S.-based companies, and the same is expected to be true of LinkedIn, according to BGC analyst Colin Gillis. He made this observation in his report dated Feb. 4. He downgraded the company from Buy to Hold and has a $230 per share price target on the stock. He also says he remains mostly positive on LinkedIn’s business model, however.
The analyst expects the social network’s December quarter results and 2015 guidance will disappoint because of currency exchange issues. He points out that about 60% of LinkedIn’s revenue comes from the U.S., 7% comes from the other Americas, 25% comes from the Middle East, Europe and Africa, and 8% comes from the Asia Pacific region.
LinkedIn usually guides conservatively
Gillis also pointed out that LinkedIn management usually guides conservatively to engineer an earnings beat. This is obvious by the company’s beats in both adjusted earnings per share and revenue in the last eight consecutive quarters.
Even though much of Wall Street already knows the company guides conservatively, he still thinks investors will be disappointed by the guidance provided in tonight’s report.
Expectations for LinkedIn’s earnings report
The analyst reminds us that LinkedIn guided for revenue of between $600 million and $605 million for the December quarter and adjusted EBITDA of between $153 million and $155 million. Gillis’ estimate is $613 million, compared to the consensus estimate of $617 million.
His adjusted earnings per share estimate is 55 cents, which is just slightly ahead of the consensus estimate of 53 cents per share. Gillis estimates Talent Solutions revenue of $370 million and $121 million in revenue from Premium Subscriptions for the quarter.
The analyst points out that shares of LinkedIn declined by more than 6% last year after the social network’s December quarter. As of this writing, shares of LinkedIn were up 0.42% at $233 per share.