Could LinkedIn Deliver A Beat During The Second Quarter?

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LNKD: LinkedIn logo
LNKD
LinkedIn

LinkedIn (NASDAQ:LNKD) will report its financial results for the second quarter of 2015 on Thursday, July 30th. [1] While the company could continue to face challenges pertaining to dollar appreciation, macro-economic headwinds in Europe and customer churn in Q2 2015, we believe the top-line growth could have grown more than 27% during the quarter. Additionally, we expect to see a robust increase in the user base and engagement metrics, owing to several growth initiatives; these include: 1) a re-design of member profiles; 2) enhancements in the  jobs listings and publishing network; and, 3)  expanding the reach reach of the mobile platform and international geographies. Notwithstanding these short-term issues, we see a strong long-term outlook for LinkedIn, helped by its growing popularity and new opportunities in the online learning market.

See our complete analysis for LinkedIn

Impact Of Recent Challenges On Top-Line And Earnings Will Be The Key Focus Of The Earnings

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The key reason why LinkedIn’s stock tumbled in the wake of Q1 2015 earnings release, was weak guidance on both the top-line as well as profitability for the rest of the year. This was further caused by near-term challenges such as dollar appreciation, lower demand for display advertising in Europe, a re-alignment of sales workforce (which caused a degree of customer churn), and accounting considerations for Lynda’s revenues. We expect these challenges to continue to play out in the quarterly earnings, and hence, we forecast that the margins declined meaningfully in year-over-year terms during the second quarter. However, in terms of revenue, we think the company could post more than 7% growth with the Q2 report, helped by broad-based growth across business segments.

We expect to see broad-based growth across all the business segments — Talent Solutions, Marketing Solutions, and Premium Subscriptions during the quarterly results. This will be fuelled by both rise in corporate customers as well as increased business with existing customers. Additionally, the high demand across products such as Sponsored Updates, Lead Accelerator and Sales Navigator could lift growth during the second quarter.

Growth Strategies Could Lead To Higher Engagement Levels

We think LinkedIn could post a significant lift in member base and engagement metrics with  the second quarter release, helped by its various growth strategies. The company’s efforts to drastically raise the number of job listings, expand its publishing platform, enhance its mobile apps, and add international members should have continued to gain ground in the second quarter, in our view. The number of job listings rose from 3 million in Q4 2014 to 3.5 million in Q1 2015, and we expect to see a sharp increase in this metric for Q2 as well. Moreover, with over 1 million members now publishing on the LinkedIn platform, we expect to see the number of weekly long-form posts to cross 100,000 in the quarterly results. [2]. Additionally, we are interested to see the new steps being taken by LinkedIn to enhance its member base in countries such as China and India, which have contributed for more than 10 million and 30 million members respectively to the LinkedIn platform. [3] [4]

 

We will revise our $741 price estimate for LinkedIn’ stock post the earnings release.

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Notes:
  1. LinkedIn Announces Webcast of Second Quarter 2015 Business Results, LinkedIn Investor Relations, July 09, 2015 []
  2. More than 1 Million Members are now Publishing on LinkedIn, LinkedIn Blog, July 9, 2015 []
  3. China LinkedIn users top 10 million, WantChinaTimes, July 23, 2015 []
  4. LinkedIn crosses 30-million member mark in India, Hindustan Times, May 07, 2015 []