LinkedIn Climbs Back Up To $90: Why It's Time To Short Again

| About: Microsoft Corporation (MSFT)
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LinkedIn (LNKD) is getting closed to $90 a share again after posting better than expected earnings and as a beneficiary of the Facebook (NASDAQ:FB) IPO buzz, which has also lifted social media brethren Zynga (NASDAQ:ZNGA) higher over the last week or so. $90 a share has been a technical resistance level for LNKD for quite some time and given its still stretched valuation, I think it fail at this level once again. I posted an article back in mid-October during one of its tries to get over this resistance level advocated shorting the stock. LinkedIn promptly fell to under $60 and my position closed out easily in the money.

I believe we are the midst of an expanding social media "bubble" that will provide plenty of short opportunities including the above mentioned Zynga. The top of the bubble should be marked by the IPO of Facebook, which I am waiting for with anticipation. I think Facebook will run up anywhere from 25% to 50% on its first day and carry a lot of the social media stocks up with it until its IPO. However, I feel free shorting LinkedIn even before Facebook's IPO for myriad reasons.

8 reasons I am short LinkedIn at $90:

  1. As you can see from the chart below, $90 is a formidable resistance level (see chart, click to enlarge image):

  2. Some 55mm in shares held by insiders come off lockup February 27th.
  3. The CFO or CEO was interviewed on CNBC last week. One item that caught my attention was the company hired less than half the 500 people they stated they were going to hire this quarter on their prior quarterly earnings conference call. This definitely helped their margins and profitability in quarter, but might have negative longer term impacts.
  4. Although minor at this point, the company faces new competition from BranchOut and
  5. Based on earnings report, JP Morgan immediately raised its target from $84 to $90; a level this one day rally has already achieved.
  6. The stock is selling at 90 times FY2013's projected EPS (although that number should go marginally due to this earnings report)
  7. The company is past pricey at approximately 70 times operating cash flow and 9 times expected FY2012 revenues even after expected revisions.
  8. If the jobs recovery falters, LNKD could be significantly impacted.

Disclosure: I am short LNKD via April 95/100 bear call spread