Earnings Preview: LinkedIn Q2 2014

Jul.29.14 | About: LinkedIn (LNKD)

Summary

LinkedIn, Corp. is slated to report 2Q 2014 earnings after the bell on Thursday, July 31st.

Non-GAAP Earnings Per Share: The current Street estimate is $0.39 (range $0.25 to $0.47).

Revenues: Company guidance is a range of $500 mln to $505 mln. Analysts expect an increase of 40.6% y/y to $511.20 mln (range $502.67 mln to $529.35 mln).

By Craig Bowles

Overview

LinkedIn, Corp. (NYSE:LNKD) is slated to report 2Q 2014 earnings after the bell on Thursday, July 31st. The earnings release is expected at approximately 4:00 p.m. EST followed at 5:00 p.m. with a webcast presentation available through LinkedIn Investor Relations. LinkedIn is the premier social network for professionals around the globe.

Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share: The current Street estimate is $0.39 (range $0.25 to $0.47) (Source: Yahoo! Finance). Results have beaten estimates every quarter since the IPO.
  • Revenues: Company guidance is a range of $500 mln to $505 mln. Analysts expect an increase of 40.6% y/y to $511.20 mln (range $502.67 mln to $529.35 mln).
  • Registered User Base: The Registered User Base for 2Q 2014 is projected to increase from 296.5 mln at the end of 1Q 2014 to 310.4 mln, with estimates running as high as 317.3 mln, according to Zack's Investment Research.

Revenue Guidance:

  • Revenue Guidance (3Q 2014): The Street is looking for an increase of 37.7% y/y to $541.18 mln (range $521.00 mln to $584.17 mln).
  • Revenue Guidance (FY 2014): Company guidance is currently a range of $2.060 bln to $2.080 bln. Analysts expect a 39.2% increase to $2.13 bln (range $2.08 bln to $2.24 bln).
  • Insiders have sold 46,433 shares in the past three months and 70,610 shares over the last year.
  • LinkedIn shares have a 1-day average price change on earnings of 10.00%. Options are pricing in an implied move of 9.23% off earnings.

Recent News

  • 07/29 JPMorgan expects LinkedIn to report solid financials with the bad first half of the year to be followed by a better second half. Investors can take advantage of options showing a big fear premium, according to a post on Barron's Blogs.
  • 07/28 Wunderlich Securities said the acquisition of Bizo will offer better ad targeting and segments should show growth with premium subscriptions increasing 40 percent YoY, according to a post on Benzinga.com.
  • 07/19 LinkedIn is growing through acquisitions and expansion into China, and could pose a threat to Facebook as it gains more popularity and becomes a better publishing platform oriented toward businesses, according to a post on Fool.com.
  • LinkedIn analysts have 13 buy ratings, 10 hold, and 1 sell rating with a consensus price target of $228.50, according to a post on Analystratings.net.

Technical Review

LinkedIn shares peaked in September 2013 and are currently testing above the downtrend line. A negative reaction to earnings has recent support around $160. Upside has the 200-day moving average at $193. (Chart courtesy of StockCharts.com)

Summary

Analyst upgrades had been coming each month citing the declining price as a buying opportunity. While that's slowed, analysts still have only one sell rating. LinkedIn has optimism surrounding expansion into China but this is a slow and developing story. The more immediate worry is that slowing job postings and usage is expected to pick up in the second half of 2014, so more attention might be paid to revenues and revenue guidance assuming the company beats earnings estimates again. Analysts' expectations for earnings have increased from 0.36 three months ago, so reporting above 0.40 on revenue above $514 mln would allow market participants to focus on guidance.

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