A Jobs Recession Will Crater LinkedIn's Business

May.20.11 | About: LinkedIn (LNKD)

49% of LinkedIn's (NYSE: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 (NYSE:MAN), market cap of $5.2 billion; Robert Half (NYSE:RHI), market cap of $4.1 billion; Monster World (NYSE:MWW), market cap of $1.9 billion; Korn/Ferry (NYSE:KFY), market cap of $0.9 billion; Kelly Services (NASDAQ: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.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.