Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
It’s a shame “professional social network” LinkedIn (LNKD) came to the market with such a tiny float, and high valuation. At least for those not handed shares in the IPO! The company has some very interesting revenue lines, and a lot of potential but due to the low float and hype, came to the market at a very expensive price. Go forward it’s the push-pull between growth and valuation as it is with quite a few of these hyper growth names. The company reports in early May, and IBD takes a closer look at the company.
- It’s not party central like Facebook. It’s the more buttoned up version for professionals, and increasingly it’s becoming the go-to place for that set. More than 150 million members have signed on to LinkedIn (LNKD) to put their best professional face forward and network with others in the job world.
- That’s an enviable position for a company that’s not even a decade old and publicly traded since last May. From its IPO price of 45, the stock is now over 100, mirroring LinkedIn’s over 100% annual revenue growth. Though most members pay nothing to join, LinkedIn makes money from companies that want to reach potential job candidates and advertisers who want to get noticed on the office version of social network Facebook.
- At year’s end, more than 9,200 corporate customers paid LinkedIn for the privilege of tapping into its online network of professionals, up from 3,900 a year earlier.
- The corporate Hiring Solutions division contributed about 50% of total revenue, or $84.9 million in the fourth quarter, an increase of 105% from the prior year. Most was from the flagship “Recruiter” product, which comes with an annual license fee of $8,200 and enables companies to access member profiles and resumes.
- LinkedIn’s advertising, or Marketing Solutions business, also was a solid contributor. Its fourth-quarter revenue grew 77% to $49.5 million.
- A third source of revenue comes from members who wish to buy premium subscriptions. Those services made up 20% of the total, or $33.3 million, a gain of 87% over last year’s same time.
- “They’ve created a new market for staffing and talent acquisition,” said Kerry Rice, analyst with Needham & Co. “Enterprises and recruiters pay LinkedIn a license to their data to try to fill positions. Most of the people on LinkedIn are not active job seekers, but it doesn’t mean they wouldn’t change jobs if the opportunity arose. It’s a great pipeline for enterprises to mine that data to identify candidates they wouldn’t otherwise have access to.”
- By most accounts, it’s been a disruptive force in the recruiting and staffing industry. Rice calls it a “category killer,” outshining online recruiting sites Monster Worldwide (MWW) and CareerBuilder. Monster was once the category killer as it built a global online staffing business in 50 countries starting with its job board in 1994. With annual revenue of more than $1 billion, it still leads LinkedIn, which posted $522.2 million in 2011, an increase of 115% over 2010.
- But LinkedIn’s market capitalization is more than four times larger than Monster’s, as Monster’s stock has petered from its heyday more than a decade ago, now trading under 10.
- About 60% of members come from international markets, though only a third of revenue is from outside the U.S. “So there’s a bit of a lag,” said Rice, who expects international revenue to grow at a faster rate.
- In the fourth quarter, LinkedIn opened new offices in Tokyo; Bangalore, India; and Sao Paulo, Brazil. India is the second largest member market, with 13 million. China is the fastest growing even though there is not yet a localized language version of the site. Much of the growth is coming from Hong Kong.
- LinkedIn has been investing heavily in staffing, products and other areas to keep its lead. Even so, the company’s earnings are expected to rise 80% this year over 2011 to 63 cents a share and gain another 72% next year, according to a survey by Thomson Reuters.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
