Why LinkedIn Corp Is Poised to Bounce Back

Does this analyst make a good case? Or from is it just more noise Wall Street?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 9, 2014 at 9:28AM
Technology and Telecom

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.DL) 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.