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  • LinkedIn - What You Must Believe To Support Current Valuations [View article]
    Thanks everyone for such lively comments and glad to have instigated some good discussion. A couple of quick follow-up points, from my view:

    -First, don't get me wrong, I still think LNKD is still a good growth story. BUT, I think all that growth plus much much more is already built into the $17B valuation. In my view, the amount of growth LNKD would need to achieve in the next 2-3 years to justify that valuation is far more than what is realistic. I think the US member base is fairly well saturated and agree with some comments that just about everyone who they want on LNKD is already on there - the question is can they monetize more of that base? Personally, I don't see too many users paying $30+/month for it unless they are unemployed professionals, and then perhaps for only the job hunt period. The recruiting side will generate solid revenue, but I don't know if that will grow 3-4x per year much longer. I think the global story is much better and there will be more growth in those markets and more opportunity to disrupt traditional HR methods, so that would be my one bright spot. Again, I just don't see it as enough of an opportunity to justify the current valuation.

    -I completely understand that the other internet companies mentioned in this article are not perfect comparisons. In any growth market it is hard to find apples-to-apples comparisons, but my point was to understand what is an appropriate EV/EBITDA multiple that LNKD will likely converge to after 1-2 years. I think 15 to 25 is about right given how many other high growth internet stocks have moved over time, and that is very high relative to most other industries, including tech, so even the converged range still reflects a very high rate of growth. LNKD could get there either by quickly growing EBITDA 4-8x (which I believe given my earlier point and much of the commentary that is not realistic) or it could get there with a price correction (much more likely in my view).

    -Finally, if nothing else I came to the conclusion that there is very little upside left in LNKD. Perhaps it will trade higher in the short term based on momentum, but certainly not on fundamentals. I believe we've gone well past the fundamental range so going long here would purely be a momentum play and that could be very dangerous at these levels.

    Thanks again for all the insightful activity here!
    Feb 18, 2013. 08:27 AM | 1 Like Like |Link to Comment
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