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  • A Deep Dive Into LinkedIn's Q1 And How You Can Justify The Valuation [View article]
    Hi Chris,

    Thank you for your very insightful comments and counterpoints. You obviously know a lot about LinkedIn and spent time formulating your response, so we will post a much more detailed response tomorrow. We just wanted to let you know that we will respond with equal thoughtfulness, but we didn't have time to do it today (Thursday).

    Talk soon,
    May 10 06:09 PM | Likes Like |Link to Comment
  • A Deep Dive Into LinkedIn's Q1 And How You Can Justify The Valuation [View article]
    Dear IMPAROOO,

    You don't have to be rude. We are simply sharing our analysis on LinkedIn and thoughts on valuation. We just want to provide an in-depth analysis of the quarter, and help people make informed investment decisions. We are happy to engage in thoughtful dialogue on the investment thesis, but we are not interested in engaging with people that just want to attack us.

    We do wan to address some of the points you brought up because we have a different take on the situation:

    NO MOAT?
    We think there is a massive moat being built around LNKD because the whole business model is built on the power of the network effect. With millions of professionals and recruiters on LinkedIn, and no competitive alternative, LinkedIn distances itself from the competition everyday. The information that professionals (job seekers) are providing voluntarily is robust and highly valuable to recruiters. The growth in paying customers (on the recruiter side) proves this point.

    Just like you don't want to switch from Facebook because all your friends are there, job seekers and recruiters have very little incentive to switch because they spent all this time and energy building their network on LinkedIn. This is the definition of customer captivity / high switching costs. Remember, the market will value Facebook at $90 billion and LinkedIn at $13 billion - so the market agrees that friends is a bigger business than professionals (at least for now), so it's o.k. to think that Facebook is a better platform -- you will pay for it in the stock price.

    Also, the ability to build a professional brand online is super powerful. Just because you don't value your resume or career as much as your friend network on Facebook, that doesn't mean the rest of the population thinks that way. Using one data point and extrapolating that across the world is not a intellectual accurate approach to industry / stock analysis.

    People invest heavily in their career, and LinkedIn is providing a unique platform to make this easy and accessible to employers that want to hire people.

    We are fine with this as part of the reason to go public is to provide liquidity for early investors and management. However, your point will take on more importance if it becomes more prominent.

    We focus on the cash generated by the business model. For example, in Q1, LNKD generated $0.57 in Cash From Operations per share and $0.37 in Free Cash Flow per Share. So the non-GAAp measure actually understates the earnings power of the company.

    Yes, we do believe that this quarter was an inflection point in cash flow. Most companies earn cash flow for very long periods of time, so we are not sure why your think this assumption is hard to believe. Now that LNKD has built the foundation and investing in heavy marketing, they are benefiting from a lower on-going cost structure. Combined with increasing revenue growth, this will drive higher cash flow for a long time to come.

    We are arguing that by looking at 2013 EPS, the stock valuation can be justified. The market looks ahead 12 months, so looking beyond 2012 EPS is logical -- we're already 35% through the year.

    Hope these responses address you concerns.
    May 9 02:53 PM | 1 Like Like |Link to Comment
  • A Deep Dive Into LinkedIn's Q1 And How You Can Justify The Valuation [View article]
    Yeah, let's clarify the NPV and valuation. If you look at just 2012 eps, then the valuation is hard to justify. However, given that the market usually looks out 12 months, and linkedin is a growth stock, we think valuing on 2013 is reasonable. This give you $152 in absolute price in 2013, in the bull scenario; we discount that back one year at a WACC of 15% to get the $132 in the bull scenario.

    Also, given the massive expected growth of earnings, the farther out in years you go, the stock price looks justified by the same type of calculation. Does this make sense?
    May 8 11:49 PM | Likes Like |Link to Comment
  • A Deep Dive Into LinkedIn's Q1 And How You Can Justify The Valuation [View article]
    Good catch on the table and chart not matching for the last year. We'll try to get that changed. Thank you for the heads up.
    May 8 11:42 PM | Likes Like |Link to Comment
  • Hey, Groupon: We Want More Financial Transparency [View article]
    Same here -- only Q1 guidance has been given. We absolutely agree with your assessment that providing the data would paint an ugly picture. It's a shame they such a high-profile company thinks they can get away with this garbage.
    May 7 01:26 PM | Likes Like |Link to Comment
  • The Most Important Information From LinkedIn's 1Q 2012 [View article]
    Thank you. The growth story is quite impressive -- it will be interesting to see how the valuation / fundamental battle plays out.
    May 7 10:39 AM | Likes Like |Link to Comment
  • Hey, Groupon: We Want More Financial Transparency [View article]
    A lack of 2012 guidance is likely a result of management not having a clue what is happening with the business. However, if we have faith in a management like Apple, we are o.k. with only short-term guidance.
    May 7 10:20 AM | Likes Like |Link to Comment
  • Hey, Groupon: We Want More Financial Transparency [View article]
    That's a great stat. Implies an unsustainable business model. Has the cost per subscriber acquisition been going up lately? We would assume so, but haven't done the work.

    May 7 10:18 AM | Likes Like |Link to Comment
  • Groupon's Metrics Improve But Financial Tables May Conceal Problems [View article]

    Thank you for your your thoughtful commentary on Groupon and the link to the Grumpy Old Accountants. We agree that the company is trying to hide something and their lack of financial disclosure is troubling / disappointing. We'll be creating a petition over the next few days demanding better disclosure.

    -Evan McCormick,
    Co-founder & CEO, Investors Mosaic
    Feb 16 11:28 AM | Likes Like |Link to Comment
  • Red Hat: A Software Investment For The Next 30 Years [View article]

    Awesome explanation of the business model, industry, and valuation. We think Red Hat is Best-of-Breed in the software / cloud computing industry, and have a N-T fair value of ~$50 (35x our forward EPS estimate).

    Customers are definitely trying to avoid traditional software and platform lock-in as they move to the cloud, and RHT offers one of the best solutions on the market.

    -Evan, CEO of Investors Mosaic
    Feb 13 10:37 AM | 1 Like Like |Link to Comment
  • Quick, Here's How To Play Zynga [View article]
    Good post Michael.

    We're in the camp that it's better to wait for the market to settle out with these hot IPO's. it's really hard to time these stocks against the machines the professional have.

    But we have valued to company at $9.25 after extensive research. Innovative business model with huge cash flow potential, but major risk from transition away from Facebook.

    if your interested, the detailed report can be found here:

    -Investors Mosaic
    Dec 15 02:00 PM | Likes Like |Link to Comment
  • Amazon's PE Paints A Picture Of Overvaluation [View article]
    do people think Amazon will become the target of regulators for predatory pricing given all the stuff they give away for free (movies, rental e-books, etc?) Seems like they are trying to kill the big box retailers with these efforts.
    Nov 7 05:00 PM | Likes Like |Link to Comment