49% of LinkedIn's (LNKD) revenues in the March 2011 quarter came from "hiring solutions." That segment showed a 174% growth over the March 2010 quarter.
If half the revenue and most of the growth is coming form hiring solutions, then that means LNKD is essentially in the executive search/manpower business. The search business is very cyclical. When there is a recession, business dries up. When there is a hiring freeze, the search business craters, and presumably so will LNKD's market cap in the next recession, or if there is a double-dip recession.
There are a number of public firms already competing in the hiring solutions marketplace, including the following six whose combined market caps exceed $13 million: ManpowerGroup (MAN), market cap of $5.2 billion; Robert Half (RHI), market cap of $4.1 billion; Monster World (MWW), market cap of $1.9 billion; Korn/Ferry (KFY), market cap of $0.9 billion; Kelly Services (KELYA), market cap of $0.7 billion; and Kforce KRFC), market cap of $0.6 billion.
On average, the stocks of the above six declined 62% from highs in 2007 to lows in 2009. In a recessionary environment, the same fate awaits LNKD.
Current Mrk | High | Low | ||
Company | Cap ($bb) | 2007 | 2009 | % change |
ManpowerGroup | $5.2 | $63.06 | $24.19 | -62% |
Robert Half | $4.1 | $41.51 | $14.41 | -65% |
Monster World | $1.9 | $52.36 | $6.22 | -88% |
Korn/Ferry | $0.9 | $26.42 | $8.30 | -69% |
Kelly Services | $0.7 | $33.53 | $6.30 | -81% |
Kforce | $0.6 | $16.72 | $5.59 | -67% |
Total | $13.4 | Average | -62% |
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
