The Bull vs. Bear Case for LinkedIn

The LinkedIn (NYSE: LNKD  ) story so far has been characterized by remarkable growth across all areas of the business. Some of the numbers, in fact, may astound you.

The company currently has more than 225 million registered members, and it's been able to grow sales at an annualized rate of 95% over the past two years. Investors who were lucky enough to buy shares at the IPO price of $45 have now seen gains of 306%. And the stock is up 59% already in 2013. Clearly, LinkedIn is on fire.

All that glitters may not be gold, however. Growth rates for LinkedIn are slowing, and there are legitimate concerns about the online engagement of all those members. Even the company itself admits that a substantial majority of its members do not visit its website on a monthly basis.

Most observers agree, however, that LinkedIn is a fine business. The key issue for investors is whether this company can continue to deliver outstanding returns over the long term.

We think there are good arguments on both sides of the debate over LinkedIn. In the presentation below, we've laid out both the bull and the bear case for the company.

To see the presentation in its entirety, just click the arrows within the embedded slideshow below. Alternatively, you can view each of the slides by clicking the link below the slideshow.

The Bull and Bear Case for LinkedIn from The Motley Fool.

To learn more about another stock that is poised to benefit from emerging trends, check out our latest free report: The Motley Fool's Top Stock for 2013. The company analyzed in the report was handpicked by The Motley Fool's Chief Investment Officer, who predicts it'll have an excellent year in 2013. You can access your free report by clicking here.


Read/Post Comments (14) | Recommend This Article (64)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 19, 2013, at 5:41 PM, lennysims wrote:

    I would get out of this now if I owed it and I would get out of SAM Addams. they do not have enough growth (customer) to sustain the prices they are currently at and they definitely do not have the earnings or earnings growth.

  • Report this Comment On June 19, 2013, at 6:21 PM, hamerhokie wrote:

    I have used Facebook ads, Google Adwords, and LinkedIn ads, and by far the least responsive was LinkedIn. I don't think the way they engage their membership is conducive to their method of ad service.

  • Report this Comment On June 19, 2013, at 6:47 PM, p366 wrote:

    hamerhokie,

    Regarding SAM, it just introduced the "Sam Can" on May 29th.

    http://www.cleveland.com/taste/index.ssf/2013/05/sam_can_int...

    Until then, SAM could not sell its beer in sports stadiums because it would not sell its beer in cans and stadiums would not sell beer in bottles. There was/is the on tap option, but apparently its beer was not widely offered on tap in various sports arenas.

    So, it has been 3 weeks since SAM offered its beer in cans and I, as a SAM owner, am waiting to see how it does.

    Pam

  • Report this Comment On June 19, 2013, at 7:42 PM, jfjftmyers wrote:

    Ican see why LinkedIn is growing the number of members. I have received at least a dozen emails from friends asking me to join L I. None of the friends sent these mails on their own. Obviously, someone is hacking their accts to get these invites sent out. And this is one way they are getting the member count up.

    JJ

  • Report this Comment On June 19, 2013, at 8:53 PM, p366 wrote:

    JJ,

    LinkedIn does have a feature in which you allow it to search your address book for potential contacts. In my experience, it is very easy for users to inadvertently authorize mass mailings to everyone in their address book. Though it is possible to abort most invitations, some slip through.

    So, no, I don't think hacking is a problem. Rather, it is a sometimes difficult to control contact system within LinkedIn.

    Pam

  • Report this Comment On June 21, 2013, at 12:38 AM, mikecart1 wrote:

    LinkedIn is facing the fork in the road on how to run a company. One road is on being a legit employment site with real people and real members and real service. The other road is being just another social network where the quality of everything it represents is nearly worthless.

  • Report this Comment On June 21, 2013, at 2:38 PM, TMFBiggles wrote:

    This is a really solid analysis on both sides. I'm pretty impressed with the depth of the details here.

    - Alex

  • Report this Comment On June 21, 2013, at 3:03 PM, p366 wrote:

    Thanks Alex,

    Pam

  • Report this Comment On June 27, 2013, at 4:56 PM, lukascranac wrote:

    Nice article. I know this is a rec at the Fool. but p/e 700? how can any sane person live with that? I know FB is north of 500 and there is CRM or AMZN is like infinity since loosing money is company policy there.

    Internet stocks love to sport crazy valuations. their venture capitalist early investors make sure of that. This sad thing started to affect the 3d printing industry as well.

    I need to see a dip to buy into this. Market Crash please come!

  • Report this Comment On June 27, 2013, at 6:59 PM, p366 wrote:

    lukascranac,

    I am with you. IMO, LNKD is very overvalued. Guidance given during last qtr's conference call disappointed and the stock was punished. I think it will be very challenging for LNKD to delight the market enough to maintain its lofty multiple. I think the low hanging fruit has been plucked.

    While it has introduced some new features to make its site stickier, it remains to be seen if that translates into moolah. IMO, it is becoming more and more a social networking site. While it is great to have a place where people in the same profession can go and discuss topics of mutual interest, little of this drops to the bottom line, since participation is free. Advertisers may be induced to pay higher rates, but what percentage of those in the discussion groups ever click on their ads?

    I have never done so intentionally, but by accident while using my tablet.

    Unemployment remains historically high here and in most other countries, which should be an opportunity for LNKD. The question is, how many hourly workers, the largest of the unemployed, are going to turn to LNKD? I think, not many because either they don't know about it or they are union and expect to get work through their local hall.

    I don't own LNKD for all of the above reasons. I have no position in it of any kind. But, were I thinking about buying a stake, I would just take a nibble, maybe 10-20% of what would be my target stake.

    Thanks for your comment,

    Pam

  • Report this Comment On July 06, 2013, at 11:33 AM, 3DoggieMom wrote:

    LinkedIn has potential, but their current business model of allowing fake accounts (which account holders use to SPAM message boards) is hurting the company's image with real members. And, it could be so easy for them to fix. Unless they become serious about membership, they will go the way of other social media.

  • Report this Comment On July 07, 2013, at 7:18 PM, Mayvau wrote:

    I believe LNKD should seriously consider acquiring J2Global. (JCOM) for shares. Growth going forward for both companies will be coming from the same worldwide demographic/business customer.

    JCOM currently does business in 49 countries and has 11 million paying subscribers. LNKD does business in over 200 countries and has about 2.25 million "Premium" (paying) members.

    If every JCOM subscriber automatically qualified to become a LNKD Premium subscriber the count for the combined company paying subscriber base could be up 500%.

    More importantly the combined LNKD offering additional JCOM services to Premium members would be a very real and daily used measurable service for such members.

    JCOM gives LNKD a huge mobile presence, access to additional ad revenue sources, and possible video production services for all clients. LNKD in return gives JCOM additional strength and name brand for additional complimentary acquisitions worldwide.

    Almost every LNKD financial metric would improve dramatically with such an acquisition. Just a thought.

  • Report this Comment On July 09, 2013, at 4:42 PM, Total06110 wrote:

    Who in his/her right mind purchases anything via social media advertising? Advertisers need to wake up and realize that reaching millions may not directly correlate to selling anything.

    Sell your stock today.

  • Report this Comment On January 01, 2014, at 10:36 AM, cbrown1958 wrote:

    LinkedIn has fallen off the tracks and is now irrelevant. Key to a B2B social media site is group discussions as this brings savvy readers who might actually buy something to the site. Finding out Janie is working for 'Unemployed' doesn't inspire anyone to buy anything nor does finding Janie has survived a year at Target 'work anniversary!'

    Linked In killed the groups with their SWAM policy which allows one group manager to effectively muzzle a members participation in group discussions. You got it - Macys can muzzle Gimbles - a policy instituted by LI, but not policed by them. For more info look at

    http://www.linkedin.com/groups?home=&gid=4911853&trk...

    SWAM (Site Wide Auto Moderation) Support - A SPAM Free Group

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