LinkedIn Delivered A Beat In Fourth Quarter

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LinkedIn

LinkedIn (NASDAQ:LNKD) surpassed market expectations during the fourth quarter, with 44% top-line growth and non-GAAP diluted EPS of 61 cents. It continued to deliver promising user engagement metrics, driven by measures including redesigning member profiles, growing the mobile ecosystem and publisher network, strengthening jobs listings, and expanding into newer geographies. The results were lauded by investors, which drove more than 15% increase in the company’s stock price.

We believe the company will continue to see rapid increase in monetization in the coming future, fueled by broad-based growth across all segments. Product innovations, along with increased member engagement, will push up demand for recruiting, marketing, and selling services on its platform. We also expect LinkedIn’s profitability to move north in year-over-year terms in the coming quarters, due to operating leverage and increased efficiency.

We are in the process of revising our $163 price estimate for LinkedIn’s stock.

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See our complete analysis for LinkedIn

Member Engagement Continues To Go Up Driven By Growth Strategies

LinkedIn delivered robust user and engagement metrics in the fourth quarter, driven by various growth strategies. Cumulative members rose by 25% to 347 million, and unique visiting members increased by 22% to reach 93 million per month. The 36% rise in member page views outpaced growth in unique visiting members, resulting in increased engagement (as measured by member page views per unique visiting member). SlideShare also saw strong engagement, as monthly unique visitors reached 70 million on its platform.

Strong progress was seen against growth initiatives during the fourth quarter. LinkedIn’s focus on strengthening the mobile ecosystem, showed promising results as the share of mobile devices in overall unique traffic rose to 49% in Q4, up from 43% in Q1. A multi-app strategy encompassing LinkedIn app, Pulse, Jobs, Connected, and SlideShare continued to gain traction among consumers. Its long-term goal to host all available jobs across the globe on LinkedIn’s platform  also received a boost as the number of job listings on the platform have now risen to over 3 million, as compared to about 2 million at the end of Q3. LinkedIn’s mobile job app gained high acceptance among consumers, as it has recorded more than a million downloads to date. We believe the ongoing expansion in job listings is encouraging, and it will bolster LinkedIn’s value proposition for both active job seekers as well as for customers within Talent Solutions segment.

LinkedIn’s efforts to build a publishing platform also gained success as the number of weekly long-form posts have now crossed 50,000, as compared to 40,000 at the end of Q3. LinkedIn has now made the publishing feature available for all its English language members totaling about 230 million, and plans to roll out this service for other languages soon. We expect broad-based roll-out of this functionality along with the redesign of desktop homepage to significantly boost engagement on the platform.

LinkedIn’s move to expand internationally is another growth driver for the business. The share of international in overall revenues rose to 40% in Q4 2014, as compared to 39% in a similar period a year ago. More than three-fourths of new member additions on LinkedIn came from countries outside the U.S. during Q4. Launch of a simplified Chinese language site in early 2014 contributed for four million additional members during the year. The company recently received approval against its Internet Content Provider (ICP) license application for its local Chinese site. We expect this to positively impact member additions in the coming quarters, as China accounts for a significant proportion of professional population across the world.

Strong Growth Seen Across All Business Segments

Rapid growth was reported across all business divisions — Talent Solutions, which comprises for around 57% of overall business, grew by 41% annually. LinkedIn’s strategy to expand its sales workforce drove healthy increase in both new customers as well as business with existing customers. It saw record low customer churn in Q4, and we believe the company can continue this performance throughout 2015.

Marketing Solution segment saw 56% sales growth, driven by strong demand for sponsored updates and significant contribution from the recently acquired Bizo business. We believe these factors will fuel demand in this segment in the coming quarters as well. Despite the ramp up of free trials, Premium Subscriptions business saw 38% growth during Q4. The new Sales Navigator product has seen strong traction with customers, and we expect this to bolster business within this segment in the coming future.

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