LinkedIn's Results Suggest It's The New Job Hotspot

Aug. 8.12 | About: LinkedIn (LNKD)

Business-networking and hiring-solutions company LinkedIn (LNKD) reported terrific second-quarter results. Adjusted earnings grew 60% year-over-year to $0.16 per share, which was equal to the consensus estimate. Revenue accelerated at a torrid 89% pace to $228 million, slightly better than the Street predicted. Unlike a flurry of highly valued companies like Chipotle (CMG), Facebook (FB) and Amazon (AMZN) that posted decelerating growth, LinkedIn's quarterly report did not disappoint. More importantly, the firm increased its full-year revenue and EBITDA guidance range. The revenue range increased to the range of $915 million-$925 million from $880 million-$900 million. EBITDA (earnings before interest, taxes and depreciation) guidance increased to the range of $185 million-$190 million from $170 million-$175 million.

Coupled with Monster Worldwide's (MWW) terrible quarter, we think LinkedIn is quickly becoming the premier online hiring destination for both workers and employers. Hiring Solutions revenue grew a whopping 107%, to $122 million, during the second quarter compared to the same period last year. Management noted that it signed a large contract with Microsoft (MSFT) to provide hiring solutions. Further, recent talks with recruiters suggest the LinkedIn suite of products is quickly becoming the status quo in the industry. Many seem to love the relatively simple interface and tremendous access to job candidate details.

Marketing Solutions revenue grew 64%, to $63 million. Large companies continue to flock to the website thanks to its favorable demographics and increasing rate of activity. We think both the engagement growth and increase in employers hiring primarily via LinkedIn have helped drive Premium Subscriptions revenue, which increased 82% year-over-year to over $43 million. This is a prime example of a network effect, as the value of LinkedIn increases considerably as more and more users flock to the website to look for jobs and to post jobs. The business networking model of the firm may lead to a more efficient hiring market, thus making the use of job boards like Monster and CareerBuilder (GCI) obsolete.

Still, we think LinkedIn's valuation is rather high and we wouldn't chase the shares up here by any means.

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

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