Social Networking: LinkedIn (LNKD) Accomplishment Shames Facebook (FB)
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Social Networking is beginning to look like a tale of two companies, so to speak. Shares of professional networking company, LinkedIn (Nasdaq: LNKD) climbed 12 percent today following a positive second quarter earnings report. On the other hand, Facebook (Nasdaq: FB) shares declined significantly following its earnings report last month, hitting record lows this week.
The story with social networking companies is often discussed by industry insiders, and it usually doesn't take long for the conversation to come around to revenue. The big question is, can these companies monetize users?
According to the latest earning report from LinkedIn (Nasdaq: LNKD), it isn't out of the question. On the contrary, the company's 2Q results exceeded even the high end of expectations as revenues grew 89 percent yoy to $228 million versus consensus of $216 million. LinkedIn also raised its full year guidance above consensus, a bold move for a company in a sector plagued with doubts.
Heath P. Terry, an analyst from Goldman Sachs, commenting on LinkedIn's earnings, said "We believe valuation concerns will largely fade as estimates are revised higher on the success of the existing business lines and new revenue streams, like Sales Navigator, that come from leveraging the network."
As a result of the surprisingly strong numbers, Goldman Sach reiterated their Buy rating and raised their price target on LinkedIn. A number of other analysts came out with positive comments on LinkedIn today.
A close look at LinkedIn's earns shows that hiring solutions revenue grew
107 percent. "Despite the global macro challenges, we believe LinkedIn is gaining share as enterprises shift their recruiting budgets away from traditional channels towards LinkedIn," said Kerry Rice of Needham and company.
If correct, that puts LinkedIn in competition with traditional online jobs search engines, like Monster (NYSE: MWW). This is an interesting wrinkle in the story, but doesn't do much for LinkedIn's core business of social networking. LinkedIn also has to come face-to-face with the same problem that hit Facebook (Nasdaq: FB), the transition to mobile.
All and all, today's earnings report is positive for LinkedIn and may help turn the tide back in favor of social networking, but let's be clear about the challenges LinkedIn and Facebook have turning advertising into dollars. They haven't proven they can do it yet. The day they can is the day the sector returns to its glory days. Until, investors will be waiting for more clarity, and trading will likely be volatile, especially around earnings reports.
The story with social networking companies is often discussed by industry insiders, and it usually doesn't take long for the conversation to come around to revenue. The big question is, can these companies monetize users?
According to the latest earning report from LinkedIn (Nasdaq: LNKD), it isn't out of the question. On the contrary, the company's 2Q results exceeded even the high end of expectations as revenues grew 89 percent yoy to $228 million versus consensus of $216 million. LinkedIn also raised its full year guidance above consensus, a bold move for a company in a sector plagued with doubts.
Heath P. Terry, an analyst from Goldman Sachs, commenting on LinkedIn's earnings, said "We believe valuation concerns will largely fade as estimates are revised higher on the success of the existing business lines and new revenue streams, like Sales Navigator, that come from leveraging the network."
As a result of the surprisingly strong numbers, Goldman Sach reiterated their Buy rating and raised their price target on LinkedIn. A number of other analysts came out with positive comments on LinkedIn today.
A close look at LinkedIn's earns shows that hiring solutions revenue grew
107 percent. "Despite the global macro challenges, we believe LinkedIn is gaining share as enterprises shift their recruiting budgets away from traditional channels towards LinkedIn," said Kerry Rice of Needham and company.
If correct, that puts LinkedIn in competition with traditional online jobs search engines, like Monster (NYSE: MWW). This is an interesting wrinkle in the story, but doesn't do much for LinkedIn's core business of social networking. LinkedIn also has to come face-to-face with the same problem that hit Facebook (Nasdaq: FB), the transition to mobile.
All and all, today's earnings report is positive for LinkedIn and may help turn the tide back in favor of social networking, but let's be clear about the challenges LinkedIn and Facebook have turning advertising into dollars. They haven't proven they can do it yet. The day they can is the day the sector returns to its glory days. Until, investors will be waiting for more clarity, and trading will likely be volatile, especially around earnings reports.
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