David Trainer: We put LinkedIn Corp (NYSE:LNKD) ~$175/share in the Danger Zone last August when it was valued at $240/share. Despite its 30% decline since, we remain bearish on the stock. LNKD’s 2013 Form 10-K revealed that many of the issues we identified, including slowing growth, declining margins, and hidden liabilities, have worsened. These issues are significant and LNKD remains highly l overvalued even after its recent drop.
LNKD’s stock valuation embeds significant future profit growth, so it should be of great concern to investors that the company’s growth is decelerating. Figure 1 shows that LNKD is experiencing slowing growth in membership, page views, and revenue.
Figure 1: Slowdown in Growth Across Key Activities
Sources: New Constructs, LLC and company filings. Data collection for visitors and page views changed in 2009 so 2010 growth rate is not available.
Investors should be especially concerned over the slowdown in revenue and page view growth. LinkedIn’s visitors are engaging with the site less, and the company is having less success in earning revenue from them.
Quarterly numbers suggest the situation could be even worse than expected for LNKD. Unique visitors actually declined quarter over quarter in Q3 and Q4 2013. This decline highlights the problem LNKD faces in trying to differentiate its service. LNKD is just a platform for professionals to connect on, and plenty of other sites can provide that platform. More and more employers are using Facebook (FB), Twitter (TWTR) and Google + (GOOGL) to assist in recruiting employees.