Why We Revised Our Price Estimate For LinkedIn From $214 To $174

February 26th, 2016 by Trefis Team
-5.48%
Downside
196
Market
185
Trefis
LNKD: LinkedIn logo
LNKD
LinkedIn

We recently revised our price estimate for LinkedIn (NASDAQ:LNKD) from $214 to $174. The primary reasons for the price estimate revision were the increase in forecast expenses and lower revenue expectations for LinkedIn, which will pressure the company’s margins and earnings going forward. In its fourth quarter earnings call, LinkedIn provided weak Q1 and full year 2016 guidance for its top line as well as bottom line. For the first quarter ending March 2016, the company expects EPS of $0.55 against an analyst consensus estimate of $0.75. In terms of the top line, the company expects full year 2016 revenue to be around $3.6-$3.65 billion, missing the consensus estimate of $3.9 billion.

In addition to lower revenue, we expect LinkedIn’s sales, general and administrative (SG&A) expenses and research and development (R&D) expenses to increase going forward, owing to the company’s focus on improving and scaling ad products such as Sponsored Content, the shutdown of Lead Accelerator, the development of new products including LinkedIn Referrals, LinkedIn LookUp and LinkedIn Elevate, and the continued realignment of the sales workforce. The company also plans to launch a revamped Recruiter platform in 2016. Pressure in the Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) regions due to weak economic conditions were also driving factors.

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Have more questions about LinkedIn? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for LinkedIn

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