LNKD - Linkedin - Company Profile

Linkedin operates an online professional network worldwide. Members create, manage and share their professional identy, build and engage their professional networks, access shares knowledge and insights and find business opportunities.

The shares were crushed in February after they guided below analyst estimates for the full year. When they reported earnings on April 28th, they completely erased the fears about a shrinking business. Member page views rose from 37 billion in Q4 to 45 billion in Q1. Unique monthly users rose from 100 million to 106 million with total users at 433 million, an increase of 19%.

Revenue of $861 million rose +35%. The net loss per share of 35 cents was only a penny more than the comparison quarter. Revenue in the "talent solutions" segment rose +41% to $558 million. The number of candidates viewed per search is up by 40% and the number of InMails rose +30%. Sponsored content revenue rose +80% and marketing solutions revenue rose +29%. They generated positive cash flow of $252 million in Q1 and 50% growth. The various revenue metrics have put to rest fears that Linkedin is shrinking.

The company revised guidance again. They raised the revenue range from $3.6-$2.65 billion to $3.65-$3.70 billion. EBITDA is expected to rise to $965-$1.0 billion, up from the prior forecast of $950-$975 million.

Earnings are July 28th.

Shares are rebounding from their self-imposed Q1 crash. Shares have not gone straight up but in a stair step pattern. They have recovered from $100 to $137 in five months. They were trading at $192 the day before their foot in mouth report crushed the stock. They traded over $200 and as high as $280 in most of 2015.

I think they are on the way back to those levels. At the current levels their price to sales ratio is only 5.6 and very low compared to Facebook at 17.0. I believe the current valuation is too low to ignore. I am using January 2017 options rather than 2018 because the longer dated options are obscenely expensive. The dip on Friday removed some of the premium and should give us a cheaper entry.

Buy January $140 call, currently $15.35. Initial stop loss $122.85.


Sell short January $125 call, currently $11.95, no initial stop loss.
Net debit $3.40.

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