LinkedIn Corp's Earnings: What Should Investors Expect?

The social networking company reports earnings in the wake of big Facebook news. What should investors watch for in LinkedIn's first-quarter earnings?

Apr 30, 2014 at 12:30PM

LinkedIn (NYSE:LNKD) will report first-quarter earnings on Thursday, May 1. Shares of the company have dropped over 16% in the past week as the market turned on social media investments. But, LinkedIn has consistently exceeded earnings estimates and has an easy-to-grasp monetization method. LinkedIn also recently announced new updates to its advertising methods, but will Facebook's (NASDAQ:FB) stellar ad growth leave its smaller competitor in the dust? 

Here's what investors need to know for the first-quarter report. 

Estimates to beat 
Analysts estimate revenue of $466 million and $0.35 EPS. LinkedIn has beaten estimates for both metrics over the past five quarters. The company's own guidance for the quarter put revenue in the $455 million-$460 million range.

3 segments to watch
LinkedIn recently announced the addition of two new types of Certified Marketing Platforms, which allow companies to utilize easier tools for building marketing campaigns through the networking site's platform.  

This was a notable move based on how LinkedIn earns money. The company's fourth-quarter revenue broke neatly into three key segments -- talent solutions, marketing solutions, and premium subscriptions -- in decreasing order of importance.

Here's a look at the historic performance of these segments: 

Linkedin Revenue

Source: LinkedIn 

Talent solutions offers tools to help companies use LinkedIn for hiring purposes. The segment accounted for over half of fourth-quarter revenue at about $246 million.  

Marketing solutions brought in advertising revenue of $113 million last quarter through a combination of display ads and sponsored messages. The new Certified Marketing Platforms will apply to this segment in future quarters and includes the certification of a group of content providers including The Atlantic, Bloomberg, and CBS Interactive.  

Premium subscriptions trailed behind the other fourth-quarter segments with $88 million in revenue. Premium subscriptions come from members, usually job hunters or networkers, who want access to additional services such as the ability to message someone without first establishing a direct connection.

Most of LinkedIn's money comes from companies looking to hire and/or advertise. But, the number of members, both free and paid, still matters because companies will only use LinkedIn's services if there's an active audience. So, it's worth glancing at the membership metrics to check for growth. 

Competitor comparison
Facebook's first-quarter report last week beat analyst estimates on both revenue and EPS. The social media goliath reported revenue of $2.5 billion, up 72% year-over-year, and $0.12 EPS. Over 90% of the quarter's revenue came from advertising, which makes Facebook more reliant on one earning method than LinkedIn.

But, Facebook is finding profitable new ways to utilize the data collected from its 1.28 billion monthly active users. The company is holding its f8 developer's conference on April 30, the day prior to LinkedIn's earnings report, and is expected to, at a minimum, present a lucrative new mobile advertising platform.

Facebook's sheer number of members and associated user data puts the company far ahead of LinkedIn. But, LinkedIn is barely in the ad game, relying more on corporate clients needing services. Still, social networking services come and go, and LinkedIn could find itself on the way out if Facebook doesn't lose steam first. 

Foolish final thoughts 
LinkedIn makes it easy for investors to check in on its earning report with a glance. Look at the performances of the three key metrics and ensure those numbers have grown, and make sure that the membership metrics are also on the way up.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

 

Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers