LinkedIn's (LNKD) Overweight Rating Reaffirmed at Pacific Crest

Pacific Crest earlier reaffirmed an Overweight rating on LinkedIn (NYSE: LNKD) with a price target of $250. Comments follow meetings with management. Analyst Evan Wilson noted shares are trading near his bear case of $165 due to the market sell-off and as a result of choppy execution in the first half of the year. At 20x 2016 EBITDA this is a big discount to its growth rate, he said, and he thinks investors should take advantage of weakness.

"We had an opportunity to take LinkedIn on the road to see clients this week. It was very bullish about the health of the Talent Solutions business after the sales force reorganization. The net ratio continues to grow strongly y/y and q/q. The mid-single-digit price increase LinkedIn put in place in January is going very well. Half of the customer base has seen the price increase and we should see a bigger impact to the P&L in the second half of the year," said Wilson.

"Premium Display declined 10% y/y in Q1 and 30% in Q2, which admittedly surprised the company. It has not been able to hold the price of the Premium Display product given the declining market trends, largely due to programmatic advertising. The company's guidance for 2H includes a 40% decline in Premium Display, which we think makes it much less likely we will see another big surprise," continued the analyst.

Wilson added, "CEO Jeff Weiner took over product in October, which LinkedIn said has reenergized research and development employees. LinkedIn has now ramped up head count to where it feels it is no longer resource-constrained on innovation. We have joked that LinkedIn is an Internet company moving at enterprise speed; the company thinks it can fix that perception in the near term with what it has in the pipeline. We are buyers."

For an analyst ratings summary and ratings history on LinkedIn click here. For more ratings news on LinkedIn click here.

Shares of LinkedIn closed at $169.94 yesterday.

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