NFL Hall of Famer Steve Young spoke at LinkedIn last month. Image credit: LinkedIn via its corporate blog.
Shares of LinkedIn (LNKD +0.00%) stock entered Wednesday off about 1% year-to-date. Will the slide continue, or are better days ahead? A lot depends on how well the business performs. Here's a closer look at what analysts expect to see when the career network reports fourth-quarter earnings tomorrow afternoon:
| Q4 Estimates | Revenue | YOY Growth | EPS | YOY Growth |
|---|---|---|---|---|
| Low Estimate | $602.40 million | 34.7% | $0.47 | 20.5% |
| High Estimate | $634.03 million | 41.8% | $0.60 | 53.8% |
| S&P CAPITAL IQ CONSENSUS | $617 million | 37.9% | $0.53 | 35.9% |
Source: S&P Capital IQ.
Anything less than a small beat would be a disappointment. After all, LinkedIn has outperformed Wall Street's projections in each of the last four quarters:
| Earnings History | Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 |
|---|---|---|---|---|
| Consensus | $0.38 | $0.34 | $0.39 | $0.47 |
| Actual | $0.39 | $0.38 | $0.51 | $0.52 |
| DIFFERENCE | $0.01 | $0.04 | $0.12 | $0.05 |
Source: S&P Capital IQ.
Looking at the overall business, I'm watching for momentum in each of these three areas:
1. Talent Solutions accounting for a smaller portion of revenue but without sacrificing growth. LinkedIn's ambition isn't just to disrupt recruiters. According to a transcript supplied by S&P Capital IQ, CEO Jeff Weiner said during November's third-quarter conference call that he's also aiming to make the site a go-to hub for "all the world's professionally relevant knowledge." Making good would mean materially boosting contributions from areas other than the Talent Solutions business that today accounts for over 60% of company revenue.
2. Strong engagement with the platform. Weiner's ambitions also call for LinkedIn to do a better job of engaging with its members. In Q3, member page views improved 28% year-over-year to 28 billion. The more active among this group were responsible for using the platform to publish some 40,000 unique posts each week. History says that investors should expect just as much activity in the fourth quarter.
3. Mobile momentum. Mobile has become an increasingly important platform for LinkedIn with an average 42 million members using a handheld device to access the site monthly in the third quarter, or 47% of all unique member visits during that period. Q4 could mark the first time the ratio passes 50%. Last year at this time, 41% of the company's members were logging in from a mobile device.
LinkedIn reports Q4 results Thursday after the market closes; check back here then for our take on the report. And in the meantime, leave a comment to let us know what you're expecting, and what you think of LinkedIn stock at current prices.
