By Todd McDonald, Analyst
LinkedIn (LNKD) is set to report Q1 2013 earnings on Thursday, May 2. Results are typically released at 4:15 p.m. ET, followed by a conference call at 5:00 p.m. LinkedIn is the premier social network for professionals around the globe.
Outliers and Strategy
- Non-GAAP Earnings Per Share: LinkedIn typically reports a non-GAAP earnings per share, which is comparable to estimates. Analysts' consensus is for $0.31, with a range of $0.21 to $0.41. Results have beat estimates every quarter since the IPO.
- Revenues: Revenues are seen coming in at $317.08 million, with a range of $295 million to $336.79 million. Last quarter, the company issued a revenues guidance range for the Q1 2013 period of $305 million to $310 million -- well below the current consensus.
- Q2 2013: Analysts currently expect Q2 2013 revenues of $359.24 million, with a range of $338 million to $384.2 million.
- FY 2013: The consensus estimate for LinkedIn's FY 2013 is $1.49 billion. Last quarter, the company issued guidance for the FY 2013 period of $1.41 billion to $1.44 billion. Any change in this guidance could impact the ensuing price action.
- Implied Volatility: A day after earnings are released, on average LinkedIn has an absolute move of 10.37%, which is about in line with what options premiums are pricing in. It is also worth noting that LinkedIn has a high forward P/E ratio of 142.46 and a relatively small float of about 100 million shares, which is indicative of a volatile high flyer.
- Analyst Ratings: The analyst community maintains 14 buy, 15 hold, and zero sell ratings, with an average target price of $181.38.
- Sympathy Plays: Facebook (FB) and Monster Worldwide (MWW)
- May 1: According to a post on StreetInsider.com, Evercore Partners reiterated its overweight rating on LinkedIn and raised its price target to $210 from $200. The firm cites solid numbers on job postings, traffic data, and high user growth for the rating.
- April 16: National Alliance Capital initiated a buy rating and price target of $214.02, according to a post on StreetInsider.com. The firm addresses the relatively high valuation placed on LinkedIn, stating that the recent performance and opportunities in the emerging markets help to mitigate the high P/E ratio.
- April 11: LinkedIn acquired Pulse, a leading news distribution platform for approximately $90 million. The acquisition will add value by using Pulse's technology and talent to help drive the firm's mobile initiatives.
- April 1: Jefferies reiterated its buy rating on LinkedIn, while raising its price target from $175 to $215, according to a post on StreetInsider.com. Analyst Brian Pitz points to increased content, an impending raise in pricing, and solid acquisition plans.
LinkedIn has had an incredible 2013, rising almost 70% year to date with solid momentum. The RSI is approaching the 70 level, and maintained an overbought reading for the first half of this quarter. Since the shares are trading right near an all-time high, resistance is tough to find. Options premiums imply a move to approximately $213, which corresponds to the high end of the range of analyst estimates. Should earnings disappoint, look for initial support near $185, followed by $175 near the 50-day SMA.
LinkedIn has been one of the top stocks of 2013, thanks in part to rapid user growth, increased content, emerging market opportunities, well-received strategic acquisitions, and an improving job market. However, there are zero sell ratings on the Street, the valuation is extreme, and the trade may be crowded at these levels. In order to push shares higher, earnings, revenues, and revenue guidance all need to be near the high end of the range. Anything in line or below consensus could have severe consequences to LinkedIn's share price.
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