LinkedIn Surges to Record Amid User Growth OptimismAri Levy
LinkedIn Corp., the biggest online professional-networking service, surged to a record high after analysts from Evercore Partners Inc. and Wunderlich Securites Inc. released bullish reports on the company’s growth prospects.
The shares climbed 6.8 percent to a record $168.55 at the close in New York. Evercore’s Ken Sena raised his price estimate to $200 from $160 and wrote in a research report today that LinkedIn could reach $280 within five years. Blake Harper at Wunderlich initiated coverage with a buy rating and a $195 target price.
LinkedIn has more than tripled since its initial public offering in May 2011, outperforming Internet companies like Facebook Inc., Groupon Inc. and Zynga Inc., which are all trading below their IPO price. While LinkedIn has characteristics of a consumer Web company -- offering a free service and selling ads -- it also has an expanding paid subscription business for corporate customers and premium users.
“The company’s Recruiter product and broader Talent Solutions platform have become extremely valuable for recruiters,” Harper wrote in a report today. “We view LinkedIn with a very large competitive moat around its platform given strong network effects, a highly visible revenue stream and the ability to rapidly innovate with new products.”
With its paid subscribers, LinkedIn’s growth more closely resembles so-called software-as-service providers like Salesforce.com Inc., Workday Inc. and ServiceNow Inc., Sena said.
Salesforce, which provides web-based customer relationship management software, traded at 12 times sales one year after its 2004 IPO, Sena wrote. LinkedIn trades at 10 times sales this year and seven times revenue for 2014, higher than consumer Internet companies, according to his analysis.
“While LinkedIn has a large consumer-facing audience component, its businesses are increasingly akin to software enterprise providers,” Sena wrote. Those companies have “sticky subscription revenue streams, vast addressable markets” and high margins, he said.