- Atlantic Equities, BMO, Cowen, JPMorgan, Mizuho, Monness Crespi, Raymond James, RBC, SunTrust, and Susquehanna have downgraded LinkedIn (LNKD) to neutral ratings after the company offered weak Q1/2016 guidance with its Q4 beat, and suggested several factors related to hiring solutions, online ad, and subscription growth were to blame. Shares have crashed to levels last seen in 2012.
- Raymond James' Justin Patterson, who previously had a Strong Buy rating: "While guidance likely contains some conservatism, LinkedIn’s now provided cautious guidance for three of the past four quarters and earnings quality is poor (i.e. [stock compensation[ now represents >60% of EBITDA, with revenue growth decelerating). Thus, we believe the after-hours reaction is warranted and that LNKD shares are likely range-bound until growth reaccelerates, guidance volatility subsides, and earnings quality improves."
- Citi's Mark May (Neutral): "While 4Q15 results could be characterized as mixed, three of the last four quarters have now included ‘issues’ ... Even considering mgmt’s history of conservatism, guidance implies a meaningful deceleration in revenue growth to the 20-30% range from 35-40% recently, as well as 30% incremental margins for 2016, below the 32% incremental margins in 4Q15."
- Pac Crest's Evan Wilson (Overweight rating): "LinkedIn has rarely given investors a reason to own the stock in 1H and it has happened again ... we think its outlook will most likely end up being conservative as it usually is. We think for its data alone, LinkedIn is a worthy acquisition for any number of enterprise software companies at this valuation." Wilson is, however, critical of LinkedIn's decision to shutter its standalone Lead Accelerator B2B ad product. "Now Sales Navigator really is LinkedIn's only big near-term opportunity to materially increase the monetization of its data set. Ugh."
- BMO's Dan Salmon: "[W]e came away from 4Q results with less confidence in our long-term thesis. Moreover, while US employment trends are still relatively strong, an uncertain air surrounding near-term hiring appeared to develop toward year-end ... Looking more closely at the long-term product roadmap, the path to engaging new groups of power users (B2B marketers, salespeople) has been bumpier than expected."
- Stifel's Scott Devitt (Buy, $220 target) is still a believer. "Investors may question its strategy, but LinkedIn is narrowing its focus on high value, high impact initiatives and jettisoning those investments that do not provide acceptable returns. Although its marketing business will likely face distractions this year, we think LinkedIn’s talent, sales, and learning & development businesses are poised for a strong year."
- As is Needham's Kerry Rice (Buy, $200 target): "[W]e believe our estimates could prove conservative due to: 1) LNKD’s core products remain healthy; 2) LNKD continues to have a strong product pipeline, including Lynda and Sales Solutions, the full potential of which we believe is yet to be realized; and 3) management continues to stay focused in terms of both execution and resource allocation."
- Prior LinkedIn coverage