LinkedIn Corporation (LNKD) is scheduled to announce its first quarter 2012 results on May 3, 2012; we see limited revisions to analyst estimates at this point.
Fourth Quarter Recap
The company reported adjusted net earnings of 7 cents per share in the fourth quarter 2011, much better than the Zacks Consensus Estimate for a penny loss.
Revenues in the quarter were $167.7 million, up 105.3% from $81.7 million in the fourth quarter of 2010. The growth is attributed to higher premium subscription memberships that almost doubled year over year and marked the third consecutive quarter of subscriber growth. Moreover, the marketing programs and ad targeting capability continued to drive revenues in the quarter. All three revenue segments (Hiring Solutions, Marketing Solutions and Premium Subscriptions) reported substantial growth.
The company reported operating income of $10.03 million, up 42.0% from $7.1 million in the year-ago quarter. Operating income increased on the back of higher revenue increases than costs and expenses.
Net profit on a GAAP basis in the fourth quarter of 2012 was $6.9 million versus $5.3 million in the fourth quarter of 2010. Excluding special items like amortization of intangibles, non-GAAP earnings per share were 7 cents compared with 5 cents in the fourth quarter of 2010.
Agreement of Analysts
Of the 12 analysts providing estimates for the first quarter, only one revised upward in the last 30 days, with no downward revisions. Furthermore, one analyst revised upward for the fiscal 2012 and 2013.
The analysts are of the opinion that LinkedIn is the leader in the Internet-based professional networking business, which has transformed the approach toward staffing and talent acquisition by leveraging social networking over the Internet. Moreover, LinkedIn operates in a relatively nascent market. This is a very big advantage, as the company does not face competition. This should enable it to grab a higher number of customers before the next big professional network enters the market. Moreover, this advantage will help the company grow exponentially over the next few years.
Some analysts are of the opinion that the importance of LinkedIn’s demographics is threefold. First, LinkedIn has a large portfolio of well networked members providing the much needed support to its business model. Second, it is a win-win situation for Linkedin as well as its members, as some of the members earned substantial amounts as annual income through LinkedIn’s membership. Finally, LinkedIn comprises high quality members, which could influence other LinkedIn members as well as enterprises and professional organizations.
Magnitude of Estimate Revisions
Over the past 30 days, the Zacks Consensus Estimate for the first quarter and fiscal 2012 increased by one cent to 2 cents and 24 cents, respectively. However, for fiscal 2013, estimates remained unchanged at 54 cents over the last 30 days.
Our Recommendation
LinkedIn commands a leadership position in the emerging online professional networking segment. The company has attained worldwide popularity and has grown steadily over the last few quarters. LinkedIn reported impressive fourth quarter numbers, and witnessed considerable revenue upside across all the segments. The company did particularly well in the Hiring Solutions segment (up 136.2 % y/y).
The company reported consistent top-line growth, and effectively implemented certain cost control measures to improve its bottom line. Currently, competition is not severe in the professional networking space, but IT majors like Facebook, Google (GOOG) and Microsoft (MSFT) are expected to enter the market soon. Hence, the competitive scenario could change rapidly over the next few years.
LinkedIn is a Zacks #2 Rank, implying a short-term Buy rating.
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