LinkedIn is Taking Professionalism to The Next Level
Nicholas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
LinkedIn (NYSE: LNKD) is certainly changing the picture as far as professionalism is concerned. The professional networking giant is indeed taking professional networking personal. LinkedIn is enabling a paradigm shift in the recruitment process, including how candidates are sourced, how leads are organized, and how companies market to candidates. The company is dictating how professionals conduct recruitment.
LinkedIn is revamping its number one revenue generator, the talent solution, which contributes approximately 55 percent of the company's total revenue, as it looks to sweep aside any challenge posed by industry rivals Facebook (NASDAQ: FB) and Monster Worldwide (NYSE: MWW).
LinkedIn reported having reached 200 million members in its most recent quarter results. Furthermore, this number is growing by about two members per second, but even that is still no threat to Facebook’s gigantic user base. The company’s fundamental are outstanding, but Arvind Bhatia and Brett Strauser, analysts from Stern Agee, believe the metrics have already been priced into the market.
The analysts had initiated coverage of the company at Neutral on Jan. 22, citing long-term optimism, but remained flat on the company’s near term prospects. However, LinkedIn blew away analyst estimates for its December quarter. Whether or not this has already been priced to the market remains to be seen.
LinkedIn Sets Earnings Pace
LinkedIn reported earnings that beat analyst estimates for the most recent quarter, contrary to Monster Worldwide, which sent the stock plunging. Facebook reported earnings that beat analyst estimates, but this was before full earnings disclosure in its 10-Q, which sent the company’s stock plunging to trade below $30.
LinkedIn posted a net income of $40.2 million, or 35 cents a share, which beat a consensus estimate of 19 cents a share. This meant that LinkedIn floored analyst estimates for the seventh quarter in a row.
Monster Worldwide, on the other hand, posted $211.2 million in revenue, missing the average analyst estimate of $211.99 million. The company’s revenue fell by 15.5 percent year-over-year, which also contributed to a net loss of $73 million for the December quarter, as compared to last year’s income of 10.91 million.
LinkedIn kept the earnings momentum, whereas Monster Worldwide was unable shake-off the net loss. Facebook seems to be getting back to profitability, having recovered from two consecutive losses.
Do the Two Direct Rivals Stand a Chance?
LinkedIn has one of the fastest revenue growth rates on the Internet, and margins are expanding as well. Sterne Agee analyst Arvind Bhatia believes that LinkedIn's revenues could grow by 35-40 percent over the next 3-5 years, while EBITDA could maintain a growth rate of at least 50 percent. The company’s relatively new Sales Navigator product is intriguing and has the potential to generate significant revenue and EBITDA in the coming years.
Facebook, on the other hand, has introduced a Jobs App platform for professional recruitment services. However, according to critics, Facebook is likely to encounter strong headwinds trying to mix social networking with professional networking. For my case, I’d rather not mix my social profile with profession. If Facebook could maneuver that obstacle, then it would be only a matter of time before it becomes a recognized force in the business.
Meanwhile, Monster Worldwide is concentrating resources on core markets as it seeks to boost profit margins. Sal Iannuzzi, chairman, president, and chief executive officer of the company, during the December quarter earnings discussion said, “…we are concentrating our resources on our core markets and are aggressively taking the steps necessary to strengthen our business. Our advanced product offerings, robust government business and a leading traffic position provide a solid foundation for future growth as the global economy recovers.”
LinkedIn has changed its face over the last few months to try and stop any progress from Facebook’s Jobs App. The company’s trailing 12-month P/E ratio ranks best among its rivals at 800.58x, compared to Facebook’s 1,910x. Monster Worldwide still operates at a net loss, which makes it impossible to calculate its P/E. LinkedIn has an average of 86 percent in gross margin, compared to Facebook’s 73 percent, while Monster Worldwide has 53 percent. If the future is of the essence, then LinkedIn promises a better one compared to its rivals.
Nmaithya has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!