LNKD : NASDAQ : US$247.14
LinkedIn is the world’s largest professional network on the Internet with more than 200 million members in over 200
countries and territories. LinkedIn generates revenue through selling Hiring Solutions to corporations, Marketing Solutions to
Advertisers, and Premium Subscription to members and recruiters.
All amounts in US$ unless otherwise noted
SOLID Q3 RESULTS; CONSERVATIVE GUIDANCE
LinkedIn’s Q3 results were marked by continued strong execution, with revenue growth barely decelerating (from 59% last quarter to 56% this quarter, and strong delivery of revenue upside to the bottom line (EBITDA margin of 56% vs. our est. of 54%). Management issued somewhat muted growth guidance, citing tougher comps and greater Q4 traffic seasonality due to the rapid pace of product rollouts driving very high engagement and a tougher comp in Q4 2012.
With several positives on the horizon, including the continued ramp of Sales Solutions, China expansion, and continued operating leverage, we continue to like the stock despite its super-premium valuation.
Bullish: Member growth re-accelerated to 38% y/y as did Member page views, which grew 72% in Q3; marketing solutions revenue growth accelerated to 38.2% y/y, and this momentum should continue into 2014 as Sponsored Updates are fully rolled out.
Bearish: Q4 revenue guidance of $415-420 million and EBITDA guidance of $98-100 million is below our estimates of
$448M/$112.4M and consensus of $438M/109.5M.
We are raising out-year estimates slightly to account for higher growth in all segments. Our EPS estimates for 2013/14/15 go to $1.69, $2.33 and $3.90 from $1.56, $2.32 and $3.88.
We are raising our price target to $270 (up from $230) based on 60x our 2017 EPS estimate of $6.81, discounted to present at a rate of 11%. We recognize this is a premium valuation, which we believe is warranted by the company’s large opportunity and strong strategic position.