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 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  ) gained 2% in premarket trading Wednesday after Topeka Capital upgraded the online professional-networking service from hold to buy.

So what: Along with the upgrade, analyst Victor Anthony maintained his price target of $230, representing about 36% worth of upside to yesterday's close. So, while momentum traders might be turned off by LinkedIn's price weakness in recent months, Anthony's call could reflect a growing sense on Wall Street that the concerns surrounding its traffic and job postings growth are overblown.

Now what: According to Topeka, LinkedIn's risk/reward trade-off is pretty attractive at this point. "Near-term, we see 1Q14 results topping consensus estimates against conservative revenue and EBITDA guidance, with a likely increase in full year guidance -- Beat & Raise," said Anthony. "Longer-term we see LinkedIn benefiting financially from investments in R&D, Sales Solutions, Sponsored content, and China. The current broader pullback in Internet stocks has affected LinkedIn disproportionately, in our view." When you couple that upbeat view with LinkedIn's recently weak stock price -- off about 20% during the past three months alone -- it's tough to disagree with Topeka's bullishness. 

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Read/Post Comments (7) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On April 09, 2014, at 11:13 AM, Pkylie wrote:

    Yet another PUMP article from MF.

    Well done.

    CHINA , Really ?

    So what happened to the INDIA market which Lnkd hyped for over a year , it was supposed to deliver north of 35% growth in rev and profit ?

    CHINA is a DEAD market to Lnkd. Any China pundit will tell you but not the clueless at MF or wall st.

  • Report this Comment On April 09, 2014, at 3:12 PM, drannor68 wrote:

    @Pkylie couldn't help but understand what your ideas/recommendations are outside of bashing MF and LNKD for the past 10 Motley Fool articles.

    Looking at your posting history at MF or your profile, you have nothing to recommend except trolling. May need to disclose what your beef is about LNKD unless you are the pump and dump short selling type trying to create negative news. Please provide a meaningful counteranalysis if you can.

  • Report this Comment On April 09, 2014, at 5:52 PM, rbonilla wrote:

    Linkedin is very unique and offers a great way to connect with the world wide talent pool ...imho....

  • Report this Comment On April 10, 2014, at 4:20 AM, Interventizio wrote:

    I'm enticed by this business model but let's face it: LNKD is never going to be cheap enough to attract a real value investor, unless a new bear market occurs, that goes without saying.

  • Report this Comment On April 11, 2014, at 6:23 AM, PaulsMax wrote:

    I am an avid user of LNKD and AMZN. I understand the investment thesis behind AMZN - revenues continue to rise (seasonally adjusted) as they continue to take share from BAM companies and they benefit from increasing economies of scale. I do not believe in the next leg of LNKD in proposed growth: the sales solutions offered to me (I work in the financial industry) did not make any sense, the sponsored content may give them incremental revenue - but I can't imagine it will be a game changer relative to existing advertising, and China - I don't see LNKD catching on with my Asian contacts, even with some massive investment in R&D and advertising

  • Report this Comment On April 11, 2014, at 6:37 AM, PaulsMax wrote:

    Also note, that LNKD's 5-year Price-to-earnings to Growth is 5x (below 1x can imply under-valuation) - 5x is scary expensive - so LNKD is clearly a "concept" stock. Now APPL was a concept stock at one time, but at least their was always the long-term possibility that they would take share from PC's and standard cell phones - which they did. I just don't see how LNKD will be able to grow at their recent rate and fully monetize their franchise.

  • Report this Comment On April 22, 2014, at 7:24 AM, NMaddn wrote:

    Have I understood this correctly - LNKD will bounce back due to various investments and China?

    Seems like the analyst is missing the point if he's arguing fundamentals (however vague they may be) while the PEG is is 5, as PaulsMax noted above.

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10/22/2014 9:37 AM
LNKD $203.30 Down -2.08 -1.01%
LinkedIn CAPS Rating: **

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