LinkedIn Drops as Sales Forecast Trails Analyst Estimates

LinkedIn Corp. (LNKD), the biggest professional-networking site, slid 9.3 percent after issuing a sales forecast that trailed analysts’ estimates and reporting slowing growth in all three businesses.

Revenue in the fourth quarter will be $415 million to $420 million, trailing analysts’ average projection of $438.9 million, according to data compiled by Bloomberg. Sales in the third quarter climbed 56 percent to $393 million, the Mountain View, California-based company said in a statement yesterday, down from growth of 81 percent in the same period a year ago.

Growth is decelerating in LinkedIn’s talent solutions unit, which accounts for over half of sales, as well as in the company’s premium subscriptions and advertising businesses. With LinkedIn’s stock price up fivefold since its initial public offering in 2011, the company is focused on generating revenue by adding users overseas and upgrading its mobile applications.

“As you get bigger, as you’re growing off a bigger base, growth on a percentage basis is going to slow,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends buying the shares. “People have priced that rapid growth into their valuation.”

LinkedIn fell $23.03 to $224.11 at 4 p.m. in New York, the biggest percentage decline since May. The stock has still almost doubled this year.

Membership climbed 38 percent to 259 million from a year ago, when the number of users increased by 43 percent. Sales in talent solutions increased 62 percent to $224.7 million, compared with growth of 95 percent in the same period last year.

Sales Forecast

While its forecast fell short, LinkedIn’s third-quarter sales topped analysts’ average estimate of $385.2 million, according to data compiled by Bloomberg. The company has exceeded sales estimates in all 10 quarters as a public company, though in the third quarter it topped predictions by the slimmest margin yet.

“These guys have earned a reputation for putting up pretty conservative guidance and exceeding it,” said Tom White, an analyst at Macquarie Capital USA in New York.

The company reported a net loss of $3.36 million, or 3 cents a share, in the latest quarter, compared with a profit of $2.3 million, or 2 cents, a year earlier. The loss was the result of a higher tax rate from acquisitions, the company said.

Sales in the premium subscriptions unit rose 61 percent to $79.8 million, slowing from 74 percent growth a year earlier, while marketing solutions, or advertising, revenue increased 38 percent to $88.5 million, compared with 60 percent growth in the third quarter of 2012.

Mobile Users

Members who use LinkedIn’s mobile site and applications are more than twice as active as those who only visit from personal computers, LinkedIn said last week. As LinkedIn builds its revenue model for smartphones and tablets, mobile viewing already accounts for more than half of sales from an ad product called sponsored updates.

The U.S. accounted for 62 percent of revenue in the quarter, down from 64 percent a year earlier. Sales in the Asia-Pacific region soared 70 percent to $30.5 million. Chief Executive Officer Jeff Weiner said on yesterday’s earnings call that the company now has more than 3 million members in China, a market that represents increasing importance.

“When you think about the 600 million knowledge workers in the world today, and you look at the number of those people living in China, both students and professionals, it’s a very significant opportunity,” Weiner said.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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