LinkedIn Corp Has an Earnings Problem!

Source: Wikimedia Commons. 

You can't please everyone these days! Even after reporting revenue that exceeded analyst expectations for the first quarter of its 2014 fiscal year, shares of LinkedIn (NYSE: LNKD  ) fell 8% because of higher costs that depressed its profitability. Now, with shares in the social media behemoth trading at a 40%+ discount to its 52-week high, is the company hard to pass up? Should you look to Monster Worldwide (NYSE: MWW  ) for more attractive returns?

LinkedIn's revenue beat but earnings fell far short!
For the quarter, LinkedIn reported revenue of $473.2 million. In addition to being higher than the $466.6 million forecasted by analysts, the company's revenue is 46% above the $324.7 reported in the same quarter a year earlier. Although all the company's areas of operation performed well, the largest contributor to its rise in revenue was the talent solutions line, which saw its sales increase by 50% from $184.3 million to $275.9 million.

Source: Wikimedia Commons.

In terms of revenue, LinkedIn did quite well for itself, but when you look at the company's bottom line, there's a pretty good chance you'll be left scratching your head. For the quarter, the social network reported a loss per share of $0.11. On top of being far lower than the $0.20 gain the company reported last year, its net loss was way below the $0.34 Mr. Market expected to see. This disappointing figure came from a number of things, but the most notable was stock-based compensation that totaled $67.8 million.

But is Monster Worldwide any better?
Over the past four years, LinkedIn has seen tremendous growth. Between 2010 and 2013, the company's revenue grew 1,173% from $120.1 million to $1.5 billion. This top-line growth has been due, in part, to the 206% jump in registered user count from 90.4 million to 276.8 million but should also be chalked up to the company's array of products such as its talent solutions and premium subscriptions.

LNKD Revenue (Annual) Chart

Source: LinkedIn revenue data by YCharts.

This increase in sales for the business is far better than what Monster Worldwide has seen. Over the past four years, Monster Worldwide's revenue dropped 12% from $914.1 million to $807.6 million. This decrease in revenue came from declines in two of the company's three segments.

Between 2010 and 2013, its careers-international segment saw sales drop 20% from $360.8 million to $288.6 million, while the company's Internet advertising & fees segment saw revenue plummet 45% from $131.1 million to $72.7 million. The decline in sales in its careers-international segment can be chalked up to weak economic conditions in Asia and Europe, as well as foreign-currency impacts. Monster Worldwide's Internet advertising & fees segment attributed its fall to a change in business strategy in light of new regulations and lackluster margins.

From a revenue perspective, you can see LinkedIn is the more attractive prospect. This also holds true when investors look at the company's profits. Between 2010 and 2013, LinkedIn saw its net loss of $4 million turn into a gain of $26.8 million. In spite of being negatively affected by a rise in selling, general and administrative expenses, LinkedIn reported improvements in its cost of revenue, which fell from 21.6% of sales to 13.3% and its research and development, which dropped from 32.8% of sales to 25.9%.

LNKD Net Income (Annual) Chart

Source: LinkedIn net income data by YCharts.

Monster Worldwide also reported an increase in its bottom line, but its numbers don't look as reliable. Over the past four years, the company's net loss of $32.4 million narrowed to a loss of $0.5 million, but it's important to keep in mind that changes in tax benefits and liabilities as well as a loss from discontinued operations in 2012 has made the company's bottom line pretty volatile.

Foolish takeaway
Based on the data provided, it's easy to see why Mr. Market was unhappy with LinkedIn's performance. Despite reporting strong revenue, the company's bottom line was pretty disappointing. Moving forward, it will be interesting to see how the company fares, but for investors intent on a social media/employment-seeking business, LinkedIn seems to be a better prospect than Monster Worldwide.

Top dividend stocks for the next decade
One way to protect yourself against the downside of companies like LinkedIn is to buy shares of dividend-paying stocks.  These businesses provide investors with less volatility and still continue rewarding you no matter what their stock does.  

The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2947214, ~/Articles/ArticleHandler.aspx, 9/4/2015 6:43:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel Jones

Dan is a Select Freelance writer for The Motley Fool. He focuses primarily on the Consumer Goods sector but also likes to dive in on interesting topics involving energy, industrials, and macroeconomics!

Today's Market

updated 9 hours ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:00 PM
LNKD $179.10 Down -0.51 -0.28%
LinkedIn CAPS Rating: **
MWW $7.11 Up +0.05 +0.71%
Monster Worldwide,… CAPS Rating: **