Can LinkedIn Earnings Sustain Explosive Growth?

LinkedIn (NYSE: LNKD  ) will release its quarterly report on Thursday, and the company's growth prospects have continued to give investors justification for bidding up the stock to new heights. With the company still firmly in its high-growth phase, the question for shareholders is whether LinkedIn earnings can deliver on the huge promises that the stock's rich valuation is making.

Given the mixed success from other social-media investments, LinkedIn has stood out with its early success. Yet even with a big first-mover advantage, can the company build on the foundation that its network effect has given it to find more ways to monetize its growing list of subscribers? Let's take an early look at what's been happening with LinkedIn over the past quarter and what we're likely to see in its report.

Stats on LinkedIn

Analyst EPS Estimate

$0.31

Change From Year-Ago EPS

94%

Revenue Estimate

$354.03 million

Change From Year-Ago Revenue

55%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

How far can LinkedIn earnings soar?
Analysts have gotten somewhat more optimistic about LinkedIn earnings prospects in recent months. They've kept their June-quarter estimates stable, but they've boosted their full-year 2013 calls by more than $0.10 per share. That has helped support the stock's upward movement, with shares gaining another 8% since late April.

LinkedIn has done an excellent job of emerging on the social scene already fully profitable. With a combination of premium subscribers and business-generated revenue, LinkedIn has already achieved what some social competitors have never managed to accomplish: monetizing its network. The company has made it clear that finding new sources of revenue is an important part of its growth strategy, appeasing investors who are understandably nervous about the stock's rich earnings multiple.

One such effort came last week, when LinkedIn launched a new sponsored updates feature. Facebook (NASDAQ: FB  ) has had great success getting customers to buy into a similar feature, having posted more than 7.5 million promoted posts for business clients both large and small. But investors shouldn't expect LinkedIn's efforts to pay off immediately, as Facebook has gotten relatively small amounts of actual revenue from the initiative. Moreover, more ads can hurt the user experience, as Facebook has found out in recent results from the American Customer Satisfaction Index survey.

LinkedIn has also tried to present itself as a content provider, with its Influencers product providing a forum for professionals to publish insightful essays. LinkedIn pays nothing for the content, and best of all, a lack of anonymity among commenters makes discussions much more civilized than you'll typically see on forums where commenters don't have their professional reputations on the line.

The question for LinkedIn is whether it can hold off competitors. Monster Worldwide (NYSE: MWW  ) has finished its corporate restructuring and has been looking to sell itself, giving any prospective bidder a much cheaper way to break into the recruitment and career space. Perhaps more important, as Facebook, Twitter, and Google (NASDAQ: GOOGL  ) all look for ways to make their social offerings more relevant, they'll each be looking at the potential to provide career-related services to bolster their profitability. Yet Google might well choose to focus more on business-to-business services, where it already has plenty of data, rather than trying to go head-on against LinkedIn's area of strength.

In the LinkedIn earnings report, beware of any repeat of last quarter's warnings about the pace of revenue growth. For a high-growth stock like LinkedIn, even apparently successful results can lead to be share-price declines if investors' high expectations aren't met.

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