Yesterday's market moves:
Dow Jones Industrial Average (DJINDICES: ^DJI ) : 15,680, +111 (+0.72%)
S&P 500: 1,772, +10 (+0.56%)
1. IBM biggest Dow winner with $15 billion share buyback
2. LinkedIn earnings impress, but outlook depresses
LinkedIn -- or, as they call it in the Bay Area, "The social network for the unemployed" -- reported earnings for the third quarter Tuesday that beat analyst estimates. The $393 million in revenue was up 56% from the same time last year, and the company notched a net loss of $3.4 million compared to positive earnings of $2.3 million last year. Importantly, though, LinkedIn's (NYSE: LNKD ) earnings were $46 million when excluding tax impacts related to share compensation and accounting measures -- well up from last year. The networking website has 259 million users now (up 38% from last year), most looking for jobs and others in an "open relationship" with their current employers.
On Wall Street, "What have you done for me lately?" isn't enough. What will you do for me now and tomorrow? LinkedIn management forecast revenue of $415 million to $420 million for the fourth quarter. From $393 million to $420 million from one quarter to the next is solid, even for a growth company, but LinkedIn isn't just some growth company; it's like Neo from The Matrix -- the one that's supposed to bring billions of future earnings to shareholders. As with Apple's recent report, modest fourth-quarter forecasts have caused the stock to drop in premarket trading.
LinkedIn's current valuation is $27 billion, according to its market capitalization. Are shareholders satisfied with earnings in the single-digit millions? No way. LinkedIn's 150-plus price-to-earnings ratio means the shares are highly valued, and massive profits are expected in the future to keep shareholders happy. If the big profits don't materialize, then the stock price will fall to less bullish, and more realistic, levels. Investors are watching LinkedIn's moves like hawks.
3. Yelp earnings get two stars
Something smell bad? It's those Yelp (NYSE: YELP ) numbers. Shares of the restaurant-grading website for amateur reviewers (and, even worse, appetizer photographers) have plummeted 10% in premarket trading following its Tuesday afternoon earnings report. Yelp suffered a $2.3 million third-quarter loss when analysts had expected a profit.
The big problems were twofold. First, Yelp dropped $2.8 million cash last quarter to integrate two European websites it bought last year (it's never easy to mix your food). Second, the company announced that it's selling $250 million of its own shares to cash in on its Chipotle-burrito-sized growth in 2013. That's a big enough sale to send the price down hard on the dilution of profits for existing shareholders.
- At 2 p.m. EDT, the Federal Reserve will release a statement following its policy-setting meeting
- Watch reports of the JPMorgan/Department of Justice settlement at risk of falling apart.
- Third-quarter earnings: MetLife, Marriott International.
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