The Missing LinkedIn

Apr.20.14 | About: LinkedIn (LNKD)

Summary

The barriers to entry in this stock are missing.

The stock is ridiculously overpriced.

The stock may be good for a quick trade, as it is experiencing bullish technicals.

LinkedIn Corporation (NYSE:LNKD) is a professional network on the internet with approximately 277 million users in over 200 countries and territories. On February 6, 2014, the company reported fourth-quarter earnings of $0.39 per share, which beat the consensus analysts' estimates by $0.01. For the past year the company's stock price is up 0.27%, while the S&P 500 (NYSEARCA:SPY) has gained 19.91% in the same time frame. I've already purchased a batch of the stock in late August 2013 for my growth portfolio, and am down a whopping 22.12% on the batch due to a bad market tape for growth stocks. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if right now is a good time to purchase more of the stock for my portfolio.

Fundamentals

The company currently trades at a trailing 12-month P/E ratio of 797.36, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 69.86 is currently expensively priced for the future in terms of the right here, right now. The 1-year PEG ratio (13.28), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 60.04%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 60.04%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 37%.

Financials

On a financial basis, the things I look for in general are the dividend payouts, return on assets, equity and investment. The company does not sport a dividend to speak of, but is sporting return on assets, equity, and investment values of 1.1%, 1.5% and 1%, respectively, which are not that great of values. In this particular instance, I will forego the dividend aspect of the financials because the stock is in my growth portfolio; and in the growth portfolio, a stock does not have to have a dividend.

Technicals

Click to enlarge

Looking first at the relative strength index chart [RSI] at the top, I see the stock bouncing off of oversold territory back on 07Apr14 with a current value of 45.06. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line just crossed above the red line with the divergence bars increasing in height, indicating bullish momentum. As for the stock price itself ($175.42), I'm looking at the 20-day simple moving average (currently $177.90) to act as resistance and $171.48 to act as support for a risk/reward ratio, which plays out to be -2.25% to 1.41%.

Recent News

  1. The company was upgraded to a "buy" rating at Topeka. Topeka expects LinkedIn to have a strong quarter and provide good guidance.

Conclusion

This company might only be good for a trade, but not as an investment, as its moat is not too large. Fundamentally, the company is expensively priced based on future earnings and on future growth potential. Financially, there is no dividend to speak of and the financial efficiency ratios are small. On a technical basis, I believe the stock has some room to the upside right now. Due to the bullish technicals, I will be pulling the trigger here just for a trade right now. I held onto this name far too long and got clobbered on it. I should have sold it back in early September when I had a profit on it.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am long LNKD, SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.