How LinkedIn Stays Buoyant

| About: LinkedIn (LNKD)

Why is it that LinkedIn (NYSE:LNKD) continues to ride high while Facebook (NASDAQ:FB) has done a faceplant?

It mainly comes down to size and float.

LNKD is, even at its present inflated level, just one-fourth the size of FB by market cap. It has a history of steady top-line growth - quarterly revenues have nearly doubled over the last year. Its operating margins are small but reasonable. Its profit margins are tiny but with growth the bottom line grows.

FB, by contrast, is anything but stable. Year-over-year revenue growth is real but modest. Profitability has been all over the map. It's investing in anticipation of fast growth but it's questionable whether fast growth is on the horizon.

Then there's the float. LinkedIn has 105 million shares outstanding. Facebook has over 2 billion. This means more trading in Facebook, and less of an opportunity for brokers or management to adjust to a downdraft.

Linkedin has about $617 million in cash and short-term investments on its books. Institutions own two-thirds of the stock. Sales pressure can be met with buying pressure. A balance can be maintained. Shorts can be squeezed.

By contrast institutions own just 15% of Facebook. There remain lock-ups to be unlocked, and when big investors like Peter Thiel use expirations as an excuse to bail out, there is little to hold the stock up.

Based on the fundamentals of the business, I don't like LNKD any more than I like FB. A PE of almost 900 - really? Really. By comparison FB looks cheap as chips. But there are those lock-ups to get through, and I really want to look at the next few quarters' results before I make any move.

A short on LNKD at this point is a better bet than a buy on FB. But I'm not doing either.

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