Investors Are Losing Faith in LinkedIn -- but They Shouldn't Be

Why is it that whenever Facebook (NASDAQ: FB  ) teases the possibility of doing more to compete with LinkedIn (NYSE: LNKD  ) , investors flee? Is the social network really that dangerous?

You'd think so. The stock fell 1.6% yesterday, shortly after Facebook introduced a social jobs app in concert with a number of government and non-profit agencies. LinkedIn competitors (and would-be acquisition targets) BranchOut and Monster Worldwide (NYSE: MWW  ) are also involved.

In April, LinkedIn fell more than 6% in the days after BranchOut announced a $25 million series C funding round fueled in part by achieving 25 million users of its app. Half were said to be active on the site each month, raising fears of mounting competition with LinkedIn.

This time, the boogeyman is, well, a job board: "Today, the Social Jobs Partnership (SJP) is launching our Facebook app, a new tool that will make it easier for people on Facebook to find and share employment opportunities."

Can this really be the reason mouth-breathers were out in force yesterday morning? To their credit, long-term investors came back into the stock later in the day, leaving LinkedIn shares down just a half a percent on a day when the Dow Jones Industrial Average plunged 1.49%.

That a rally was even necessary is troubling. LinkedIn is a data company like no other, flush not only with information about talent but also how companies hire, what skills demand a premium, what types of affiliations inform professional connections, and so on. Intelligence that once took recruiters years to gather and synthesize is instantly available on LinkedIn.

And what about the financials? LinkedIn's revenue soared 81% in the latest quarter and is on track to reach $1 billion annualized before the end of 2013. Adjusted profits more than tripled to $0.22 a share from $0.06 in last year's Q3. Competitors aren't taking nearly the toll these bursts of panic (and the attendant hysterical headlines) suggest.

That's why I've had, and continue to maintain, a long-term bullish CAPScall on LinkedIn. The company possesses too much unique data, and is consequently too well positioned, to fall prey to an upstart as easily as the skeptics suggest.

I'm not the only one who thinks so. LinkedIn is up 5% on the S&P 500 since its May 2011 IPO. Unfortunately, the same can't be said of Facebook. And yet the company isn't without opportunities to rewards shareholders. We've outlined them in a new premium research report. We'll tell you whether this is anything to "like" right now, and (more important) whether Facebook deserves a place in your portfolio. Click here now to access your report instantly.

 


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  • Report this Comment On November 16, 2012, at 8:12 AM, homersP wrote:

    I understand that The Motley Fool may have an incentive to published biased articles such as this one that does not look at all of th facts of a situation and comes out as a cheerleader for a particular stock.

    It would be nice however, if the only purpose of the Motley fool was to publish unbiased buy-side analysis, instead of appearing to be a tool of the sell-side and pretending to be unbiased.

  • Report this Comment On November 16, 2012, at 9:16 AM, TMFMileHigh wrote:

    @homersP,

    First, thanks for writing.

    >>I understand that The Motley Fool may have an incentive to published biased articles such as this one that does not look at all of th facts of a situation and comes out as a cheerleader for a particular stock.

    No. The "incentive" here is to take a stand on a stock so that we may be held publicly accountable for the calls we make, which we believe is a huge differentiator in the world of investing commentary.

    Do you disagree with my take? Fantastic! What are the numbers that convince you LinkedIn is overvalued? What anecdotal evidence tells you the company lacks an advantage?

    Here, we are investors writing for investors and we believe debate and discussion lead to better decisions.

    FWIW and Foolish best,

    Tim

    --

    Tim Beyers

    TMFMileHigh, Motley Fool Rule Breakers Analyst, Supernova Odyssey I Portfolio Contributor

    Web: http://timbeyers.me

    Twitter: @milehighfool

    Tumblr: http://timbeyers.tumblr.com/

  • Report this Comment On November 16, 2012, at 11:53 AM, TMFMileHigh wrote:

    All,

    Here are some additional thoughts on cheerleading and bashing and the role of investing commentary:

    http://timbeyers.tumblr.com/post/35841801002/in-investing-th...

    Thanks for reading and Foolish best,

    Tim

    --

    Tim Beyers

    TMFMileHigh, Motley Fool Rule Breakers Analyst, Supernova Odyssey I Portfolio Contributor

    Web: http://timbeyers.me

    Twitter: @milehighfool

    Tumblr: http://timbeyers.tumblr.com/

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