Why Solid Earnings Aren't Enough For LinkedIn Investors

LinkedIn Corp. (NYSE: LNKD) reported fourth-quarter financial results after the markets closed on Thursday. The company had $0.94 in earnings per share (EPS) on $862 million in revenue. That compared to consensus estimates from Thomson Reuters that called for $0.78 in EPS on $857.59 million in revenue. The same period from the previous year had $0.61 in EPS on $643.43 million in revenue.

In December, the company launched its reimagined flagship app. The new app is an entirely new member platform, on which its R&D teams can iterate faster and test new features continuously. It resides at the core of the member value strategy.

The real weakness came from guidance this quarter, and it appears that many shareholders are jumping ship at the moment.

In terms of the first quarter guidance, EPS is expected to be $0.55 and revenues to be $820 million. There are consensus estimates for the first quarter that call for $0.74 in EPS on $866.86 million in revenue.

The business segments for LinkedIn reported:

  • Talent Solutions had revenues of $535 million in the fourth quarter up 45% year over year.
  • Marketing Solutions revenues increased 20% year over year to $183 million.
  • Premium Subscriptions saw its revenue increase by 19% year over year in the fourth quarter to $144 million.

Jeff Weiner, CEO of LinkedIn, commented on earnings:

In the quarter, cumulative members grew 19% to 414 million, unique visiting members grew 7% to an average of 100 million per month, and member page views grew 26%. This yielded 17% year over year growth in page views per unique visiting member, continuing a pattern of strong engagement growth over the past several quarters. Mobile in particular grew 3x faster than overall member activity, and now represents 57% of all traffic to LinkedIn.

He added:

In 2015, we organized our long-term product strategy around the principle of creating greater value for our members and our customers, connecting them to opportunity. Central to this strategy is to help members stay connected and informed, advance their careers, and work smarter. I want to take you through the progress we achieved exiting 2015.

On the books, cash, equivalents, and marketable securities totaled $3.44 billion.

Shares of LinkedIn closed Thursday up 0.5% at $192.28, with a consensus analyst price target of $277.40 and a 52-week trading range of $165.57 to $276.18. Following the release of the earnings report, shares were down 22% at $149.90 in the after-hours trading session.