Why LinkedIn Corp Is Poised to Bounce Back

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of LinkedIn Corp. (NYSE: LNKD  ) climbed about 3% in premarket trading after RBC Capital upgraded the online professional network from sector perform to outperform.

So what: Along with the upgrade, analyst Mark Mahaney boosted his price target to $250 (from $225), representing about 20% worth of upside to yesterday's close. While momentum traders might be turned off by LinkedIn's share-price weakness in recent months, Mahaney thinks that Mr. Market might be overestimating the risks surrounding its growth going forward. 

Now what: According to RBC, LinkedIn's risk/reward trade-off is pretty attractive at this point. As Mahaney noted:

Drag Issues have included: 1) overly aggressive Street estimates, 2) a heavier than expected investment outlook for '14, 3) a greater-than-expected slowdown in Talent Solutions revenue growth, and 4) uncertainty over Marketing Solutions format changes. The first issue has been addressed -- Street '14 EBITDA estimates have been reduced 11% since the beginning of this year. And we believe LNKD's '14 investments -- salesforce buildouts, product and market expansions, and acquisitions -- are coming from a position of strength against large TAMs. Our very recent proprietary work helps address Drag Issues 3 & 4.

When you couple that improving outlook with LinkedIn's still-sluggish stock price -- off about 20% from its 52-week highs -- it's tough to disagree with LinkedIn's upgrade.

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  • Report this Comment On February 26, 2014, at 10:36 AM, SocialMedianDown wrote:

    Upgrade just a way to pocket themselves. Current P/E about 900. What right mind will come out this upgrade?

    There are thousands and thousands Jobs site and HR services in China. China culture is operated locally. They still have "Hu Ko". It means Chinese don't have freedom to move even from a city to another city. It all about powerful people give a call and someone get hired. How LinkedIn can be successful there???

    This guy and Co is pumping up the stock. Remember 2001 Tech Bubble burst? Wall street pocket the money, investors have been holding the bag even today! Remember eye balls count on website to come out company evaluation? Now they are counting users numbers? Bubble will be bursting soon!!!

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