LinkedIn: A Good Growth Story
Ashish is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
What have you done for me? LinkedIn (NYSE: LNKD) is probably the only social platform that answers this question. And perhaps it is because of the value which LinkedIn brings to its users; it continues to post impressive revenue growth y/y and remains a bright spot compared to its other social networking peers.
While Facebook (NASDAQ: FB) faces the danger of its decreasing growth rate in the near term, LinkedIn does not face any such concerns, with its revenue growth remaining above 100% y/y.
Key positives for LinkedIn
Increasing mobile usage would have a positive impact:
With a strong user base of 160 million all over the world, LinkedIn enjoys its status as the world’s first and most used professional network. With added functionalities such as an iOS app and address book portability, LinkedIn has tried to make user engagement models on its mobile platform. LinkedIn remains one social network that will not face losses with the desktop being replaced by smartphones, as it doesn’t overly depend on advertising. LinkedIn has launched its mobile applications on all the major mobile platforms, and usage is strong, with 22% of unique visitors in March logging in from mobile devices. The advent of mobiles could help LinkedIn dramatically grow the engagement of existing customers, which is good news for revenues.
Hiring solutions emerging as a big revenue driver:
LinkedIn's hiring solutions accounted for 54% of total revenue in 1Q12, while revenue itself doubled from 1Q11. The company employs a large sales team to drive relationships with large companies while keeping a self-help web portal for smaller companies. LinkedIn had a customer base of 10.4k companies at the end of 1Q12, which represents 17% penetration in the company’s addressable market of 60k. LinkedIn now works to increase its penetration in existing accounts by increasing the number of seats per recruiter. There is also potential incremental pricing upside in the future with LinkedIn increasing the average pricing per seat. By adding more manpower to its sales force, LinkedIn is set to extract good growth from this area in the long term.
Little or no competition as a professional network:
LinkedIn enjoys its position as the world’s largest professional network. With more than 161 million subscribers, the company is far ahead of its competitors Viadeo (45 million) and XING (10 million). LinkedIn is on the top of its game now and has plenty of time and resources to capitalize on each opportunity as it comes.
With plenty of growth opportunities, a robust business model and the cue position it holds, LinkedIn’s fundamental looks strong. Although the company is trading at a high forward PE of 89.23, it is justified given the company’s over 100% growth rate. I believe LinkedIn is a good growth stock to add to your portfolio.
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