LinkedIn Shares Drop as Sales Forecast Trails Estimates

LinkedIn Corp., the biggest online professional-networking service, fell the most in almost two years after forecasting sales that trailed analysts’ estimates, raising concern that mobile advertising will be slow to kick in.

LinkedIn tumbled 13 percent to $175.59 at the close in New York, the biggest decline since Aug. 8, 2011. That sliced its year-to-date gain to 53 percent.

Revenue in the current period will be $342 million to $347 million, LinkedIn said yesterday in a statement. That missed the $359.7 million average analyst projection, according to data compiled by Bloomberg. While the company revamped its smartphone site and announced plans to spend $90 million on mobile newsreader Pulse, ad revenue on wireless devices may not be rising fast enough to keep up with traffic growth, said Aaron Kessler, an analyst at Raymond James & Associates Inc.

“It could be the desktop-to-mobile shift, and they don’t have as much advertising on mobile,” said Kessler, who has the equivalent of a hold rating on the stock and is based in San Francisco. LinkedIn’s ad business came in weaker than projected, Kessler said.

Before the announcement, LinkedIn’s stock had more than quadrupled since the company’s initial public offering almost two years ago. Even after today’s decline, it has a price-to-earnings ratio of about 502. Though less expensive than Facebook Inc., which trades for more than 1,400 times earnings, the ratio is many times higher than Google Inc. or Yahoo! Inc., which are valued at less than 26 times earnings.

Mobile’s Ascent

LinkedIn’s results come a day after Facebook, the biggest social-networking site, reported revenue that beat analysts’ predictions, with its mobile business making up about 30 percent of ad sales. LinkedIn and Facebook, like many popular Web applications, are testing ways to make money from mobile ads.

LinkedIn, based in Mountain View, California, didn’t break out mobile revenue in its release. In the conference call following the announcement, Chief Executive Officer Jeff Weiner said that 30 percent of customers visited through the mobile apps in the first quarter, up from 19 percent a year earlier.

Total sales in the first quarter climbed 72 percent to $324.7 million from $188.5 million a year earlier. Analysts on average had estimated $318.2 million. Net income more than quadrupled to $22.6 million, or 20 cents a share, from $5 million, or 4 cents, a year ago.

Annual Sales

The full-year sales forecast also trailed estimates. The company said 2013 revenue will be $1.43 billion to $1.46 billion, compared with the average analyst estimate of $1.5 billion, according to data compiled by Bloomberg.

LinkedIn’s biggest revenue generator is still its talent-solutions product, aimed at helping recruiters fill jobs. Sales in that unit jumped 80 percent to $184.3 million. Ad revenue increased 56 percent to $74.8 million, while premium-subscription sales rose 73 percent to $65.6 million.

Membership increased 7.9 percent from the fourth quarter to 218 million. That number has about doubled since the IPO.

Before it's here, it's on the Bloomberg Terminal.