Last week was a tough one for social media stocks, to say the least. The market expected more of Facebook
Selling like hotcakes
The primary reason I'm hopeful is that LinkedIn's Hiring Solutions business is on fire. Hiring Solutions enables recruiters to come on the site to find ideal candidates, and it's the company's largest and fastest growing business. In the first quarter of 2012, Hiring Solutions grew 121% to $103 million. This accounted for 54% of LinkedIn's revenue, and that percentage has been steadily climbing over the past few quarters. Everything I've read about the company in recent weeks suggests that growth here remains very strong. With analysts expecting revenue to come in at $215.2 million for the second quarter, another stellar performance from Hiring Solutions may allow LinkedIn to easily surpass that hurdle.
A related reason to be optimistic is that the company has been doubling down on its sales staff this year. Forbes recently reported that LinkedIn has doubled the number of sales employees in the past year, spending 33% of its revenue on sales and marketing. This compares, according to Forbes, with Oracle
Clearly, LinkedIn knows there is a very receptive market for its products right now, and it's expanding to meet the opportunity. LinkedIn's CEO Jeff Weiner told Forbes that every time the company has expanded the sales team the payoff has been "off the charts." I believe this is further evidence that we'll see huge growth from Hiring Solutions.
Like many other companies that have reported earnings recently, LinkedIn could see some weakness from Europe. Roughly 21% of its members are from Europe, and 61% of its members overall are located outside of the United States. The company expressed concerns about Europe in their Q1 conference call, and obviously things there haven't gotten any better over the past few months.
All in all, I expect LinkedIn to exceed analyst earnings expectations of $0.16 per share. Sadly, I'm not so sure the company will be able to continue its streak of seven consecutive quarters in which revenues have doubled over the previous year. In order for that to happen this time, revenue will need to come in at $242 million. It would be a grand slam for investors, if that were to happen. My colleague David Meier and I own shares of LinkedIn in our real-money portfolio, so we're looking forward to the call tomorrow.
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