LinkedIn Loss Deepens Concerns About Social Networking Valuations

Investors prepared Friday for a repeat of Twitter’s, $TWTR, takedown of social networking stocks on the heels of LinkedIn’s, $LNKD, first quarter loss and tepid guidance.

$LNKD will sell-off tomorrow the same way $TWTR did yesterday.

— Dan Kim (@simboy) May. 1 at 06:37 PM

$SOCL anti social Friday tomorrow $TWTR $EXPE $YELP $LNKD and moar

— Old Turkey (@Partridge) May. 1 at 05:10 PM

The business social network reported a GAAP loss of $0.11 per share, or $13.4 million—despite a 46% rise in revenue, compared to the same quarter a year ago. Management attributed the loss to stock-based compensation and its $120 million acquisition of job-matching service Bright.

Excluding special items, LinkedIn would have posted a $0.38 EPS gain on $473.2 million in sales. Those numbers beat Wall Street consensus estimates by $0.04 and $6.5 million, respectively, according to figures compiled by the Analyst Ratings Network.

Typically, investors focus on non-GAAP earnings. However, many on StockTwits were not willing to ignore the GAAP loss this quarter. They said the loss showed LinkedIn needed to spend too much money in order to make money.

$LNKD Why do they say "If not for the costs of employee stock compensation and certain other expenses?" How would they make Rev without?

— Mike (@scottsdalem) May. 1 at 06:47 PM

$lnkd Co. has NO Earnings, Zero, Zilch, No Dividends and Zero Real Profits Expected) Does that about sum it up?

— Poligraph Poligrafovich (@PP_Sharikov) May. 1 at 06:04 PM

Guidance gave investors more reasons to feel bearish. Management expects revenues this quarter of between $500 and $505 million. The high-end of that guidance is beneath the $505.8 million Wall Street expected, according to stats on Yahoo Finance. Management raised full year guidance from prior figures. It now anticipates 2014 revenues to come between $2.06 billion and $2.08 billion. However, that number falls short of consensus’ 2.11 billion estimate.

LinkedIn shares fell 4.4% in after-hours trading. The stock had risen 5% ahead of earnings on the heels of Yelp’s, $YELP, better-than-expected report and corresponding 10% stock jump.

Shareholders Bail on LinkedIn Despite Earnings, Revenue Increase $LNKD

— TickrWatch (@TickrWatch) May. 1 at 06:36 PM

Bearish sentiment on LinkedIn deepened after the earnings announcement. About 58% of investors on anticipate further declines, according to StockTwits’ analytics.

$LNKD CC concludes. You can disconnect and can take the share to below $140. Thank you!

— Mike (@scottsdalem) May. 1 at 05:50 PM

Some investors said that the tenor of the questions on the LinkedIn conference call indicates that analysts will downgrade the stock. Analysts asked pointed questions about the number of users that see display ads on LinkedIn’s homepage and monetization efforts in China.

$LNKD As you may have noticed, none of the analysts congratulated the company so far on the CC. Means downgrades tomorrow.

— Mike (@scottsdalem) May. 1 at 05:47 PM

$LNKD: look for a few analysts to downgrade tomorrow. Today's results were just too weak to justify the stock's current price.

— tryingtomakeabuckinthemarket (@contrarianspeculator) May. 1 at 09:50 PM

Bulls disagreed that downgrades were in the works. They argued that LinkedIn’s business was strong and that, unlike other social networks vying for ad dollars, the company enjoyed a niche with few competitors that justifies its near $19.4 billion market cap.

$LNKD Great company with wide moat just was priced for perfection – ER not perfect, hence sell off

— Omar (@TheStacks) May. 1 at 06:18 PM

But many others doubt that LinkedIn is reasonably priced, given the lack of profits. The company trades at 65X expected 2015 earnings.

$LNKD is fantastic company but it doesn't worth 20 bln

— kh (@khmusabaev) May. 1 at 05:23 PM

StockTwits’ users also raised concerns before Friday’s open about the limited number of paying users on LinkedIn. LinkedIn management said Thursday that the site has 1.5 million recruiters and 4 million human resource professionals. Recruiters and firms seeking to hire employees pay to post jobs on LinkedIn and access profiles on the site.

$LNKD Basically said it has 5.5M target customers, HR people and Recruiters. Is that worth $20B?

— BBolan1 (@bbolan1) May. 1 at 07:10 PM

Many investors anticipated that the concerns about LinkedIn would spillover into the rest of the social networking sector Friday.

$P with $LNKD tanking after hours, will this drop tomorrow like a rock? The whole $FB, $twtr, $LNKD group seem to sink/swim together.

— bopdubop (@bopdubop) May. 1 at 06:11 PM

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