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Earnings: Can LinkedIn Continue to Ring Up Big Revenue?

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February 4, 2016
LinkedIn subscriber base

LinkedIn (LNKD) is a social-media platform with a revenue edge over others in that space, according to some industry analysts. That assertion will be tested yet again as LNKD is projected to turn in robust Q4 earnings after the market’s close today, according to analysts reporting to Thomson Reuters.

LNKD is often, well, linked to other social-media platforms like Facebook (FB) and Twitter (TWTR) as far as investors are concerned. But its business plan is far different. Unlike FB and TWTR, which ring up sales primarily from advertising, LNKD aims to cash in on what it calls “talent solutions.” That’s today’s updated approach to old help-wanted classifieds. In other words, companies pay LNKD to post and fill jobs.

Tends to Beat

In the nearly five years since its IPO, LNKD has enjoyed steady revenue and profit growth. Analysts predict that happened again in Q4, according to the Thomson Reuters survey. On a per-share basis, the consensus has earnings jumping 17% to $0.78. Revenue is expected to be 33% higher than the year-ago period at $857.6 million. LNKD beat the Street consensus in 15 straight quarters by a penny to as much as $0.32, like it did in Q3.

On the post-release conference call, analysts say they will be listening for signs of growth in LNKD’s subscriber base and revenue. If analysts are on target with Q4’s revenue forecast, LNKD—with the exception of one negligible hiccup in Q1—will have reported a steady rise in revenue over 15 of 16 quarters. That’s a cumulative gain of 356%. Is that track record sustainable?

LNKD stock tends to be hot-blooded, riding the peaks and valleys that have defined the broader market’s twists and turns of late (figure 1). It’s not terribly unusual either for wide stock swings on earnings news. 

LinkedIn shares decline

FIGURE 1: CONNECTING WITH INVESTORS?

Through 2015, LinkedIn (LNKD) shares backtracked by 4%. But since hitting a pinnacle in mid-February of last year, the stock has dropped more than 25%. Chart source: TD Ameritrade’s thinkorswim® platform. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Interest Building Ahead of Earnings

Not surprisingly then, implied volatility for LNKD shares is at the 100th percentile, the highest level all year. Short-term options traders expect a potential 11.5% move in either direction for this stock around its earnings release, according to the TD Ameritrade thinkorswim® platform’s Market Maker Move indicator.

As for specific options activity, a notable number of buyers has been grabbing the weekly 200 call options and the weekly 190 and 185 put options.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price and over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.