LinkedIn stock plunged in after-hours trading last night after the company’s weak guidance and in-line first quarter results. Wall Street has become accustomed to the social network beating expectations, so results that were in line with what analysts expected may have made the downward spiral from the weak guidance even worse than it would have been otherwise.
Today LinkedIn shares plummeted as much as 20.69% to $199.96 per share. The social network posted adjusted earnings of 57 cents per share, which was in line with consensus, on revenue of $638 million, which was slightly ahead of consensus at $637 million.
Canaccord sees opportunity in LinkedIn
Today analysts from just about every firm are weighing in on LinkedIn’s earnings results. In a report dated April 30, Canaccord Genuity analysts Michael Graham and Austin Moldow said they slashed their price target from $300 to $250 per share. Interestingly, the firm’s target reduction comes less than two months after they raised their target for the company from $285 to $300 per share.
They actually called LinkedIn’s first quarter results “modestly positive,” as they beat their estimates slightly. They noted that the social network continues to see strong membership growth at 23% year over year. Also mobile visitors grew at a faster rate than total membership, climbing 39% compared to last year’s first quarter. They also noted that user engagement continues to rise as demonstrated by the rapid growth in page views.
LinkedIn’s guidance not so bad
Graham and Moldow maintained their Buy rating, however, saying that they see a buying opportunity here based on the social network’s weak guidance. Management reduced revenue guidance by about $40 million due to the first quarter beat of more than $18 million and about $50 million in headwinds from foreign exchange rates. Also the Lynda.com acquisition is expected to have an impact of about $20 million. The Canaccord Genuity team said most of the issues affecting LinkedIn’s guidance appear to be temporary.
Sterne Agee CRT analysts Arvind Bhatia and Brett Strauser echoed the sentiment that investors shouldn’t worry so much about the social network’s guidance. They said the “headline [was] worse than the reality,” noting that a little more than half of the reduction in EBITDA guidance was from the Lynda.com acquisition. Also about 80% of that reduction was from “seemingly non-recurrent items.”
Thirty percent of it was the result of currency headwinds that were worse than expected, and only about 20% was due to the core business being weaker than expected. Further, the Sterne Agee CRT team noted that approximately two-thirds of the reduction was in connection with the 10% year over year decline in the display ad business. The other third was related to the transition of sales reps in the Talent Solutions segment.
Bhatia and Strauser remain Neutral-rated on LinkedIn.
Other price target cuts for LinkedIn
At least three other firms also weighed in on LinkedIn’s results, also slashing their price targets. Cantor Fitzgerald cut its price target from $280 to $245 per share, while Wedbush reduced its price target from $260 to $200 per share. Wunderlich analysts slashed their target price from $300 to $260 per share.