LinkedIn Earnings Preview: Compared to Facebook

LinkedIn Corp. (NYSE: LNKD) has seen strong investor interest ahead of earnings, which will be reported after the close of trading on Thursday. This is the world’s largest professional social network, while Facebook Inc. (NASDAQ: FB) has the world’s largest general social network.

24/7 Wall St. wanted to show a brief preview for LinkedIn, particularly in light of the stock gapping up ahead of the report.

The first issue to consider is that LinkedIn announced on April 18 that it had reached 300 million members, located in more than 200 countries and territories. This means that the company added more than 23 million members since the end of 2013. Of the total pie of users, 67% of LinkedIn members are located outside the United States, but LinkedIn now also has more than 100 million members in the United States.

Thomson Reuters has the consensus estimates for the first quarter of 2014 at $0.34 in earnings per share (EPS) and $466.57 million in revenues. These would compare to $0.45 EPS a year ago, and it would represent nearly 44% revenue growth.

Consensus estimates ahead are as follows:

  • Q2 2014: $0.36 EPS and $505.1 million in revenue
  • FY 2014: $1.55 EPS and $2.11 billion in revenue

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LinkedIn shares closed at $153.47, but the Yelp excitement created a 4% pop to $159.60 in early trading on Thursday. Its 52-week trading range is $143.26 to $257.56, and the consensus estimate from Thomson Reuters is up at about $243.50.

The big question here is whether investors should be paying 100 times expected 2014 earnings for this growth engine. At some point, LinkedIn is theoretically more finite than Facebook due to its focus being professional versus general. Here are some general comparisons between Facebook and LinkedIn on valuations:

  • Facebook is worth $156 billion in market cap, versus $19.3 billion for LinkedIn.
  • Facebook trades at 42 times expected earnings for 2014, less than half the multiple of LinkedIn.
  • Facebook trades at 13.2 times expected revenue for 2014, while LinkedIn trades at 9.2 times expected revenue for 2014.
  • LinkedIn shares have pulled back 38% from their high, versus just over a 15% pullback from the 52-week high in Facebook.
  • Facebook already has more acquisitions announced since coming public than the entire size of LinkedIn.

Stay tuned.

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