- LinkedIn beat revenue and earnings estimates convincingly.
- LinkedIn showed improvement across metrics.
- LinkedIn’s Q1 2015 guidance indicates its first sequential decline in revenue.
LinkedIn Earnings Beat Analyst Estimates
LinkedIn earnings beat analyst estimates convincingly, with a revenue beat of 4% and a solid EPS beat of 17%. LinkedIn also surpassed its own guidance for Q4, which was much lower than estimates.
|Q4 2014||Estimates||Actuals||Beat %|
|LinkedIn Revenue ($ million)||616.93||643.43||4%|
|LinkedIn Earnings Per Share (Non GAAP EPS - $)||0.53||0.62||17%|
LinkedIn Revenue Growth Was The Highlight
LinkedIn revenue grew by a healthy 44% to touch $643 million. LinkedIn’s absolute revenue addition in Q4 stood at $75 million, its highest so far. LinkedIn saw strong growth across segments, with growth in its “Marketing Solutions” segment accelerating significantly. Marketing Solutions grew by 56% during Q4, much higher than its average of about 38% over the last year.
|Revenue||% of Revenue||YoY Growth|
LinkedIn User Growth And Engagement
LinkedIn’s member base grew by 25% to touch 347 million in Q4. User growth was the slowest it has been in terms of YoY growth. Even in absolute terms, the site’s user addition was its lowest in two years, adding 15 million members during the quarter. LinkedIn’s ‘Unique Visiting Members’ grew to 93 million. This metric saw accelerated growth of 23% YoY after having dipped in the preceding two quarters. Growth in LinkedIn’s Mobile Unique Visiting Members was also strong at 46% YoY. LinkedIn’s active members on mobile grew to 45 million, or 48% of its total active members, up from 42 million in Q3. LinkedIn’s Member Page Views grew by 34% to 30 billion. The metric saw an acceleration in growth for the third quarter on the trot.
LinkedIn’s profit margins continued to be wafer thin as the site registered operating and net profit margins of 2.2% and 0.5% in Q4. LinkedIn’s stock based compensation touched its peak at 94 million. LinkedIn’s earnings per share (GAAP) came in at $0.02.
LinkedIn Guidance Q1 2015 & FY 2015
- LinkedIn Revenue Guidance Q1 2015: $618 - $622 million
- LinkedIn non GAAP EPS Guidance Q1 2015: $0.53
LinkedIn issued a revenue guidance of $618 million to $622 million, implying a YoY growth of about 31%. LinkedIn has traditionally been conservative in its guidance, but one should note that the guidance implies a sequential decline in revenue. So far, LinkedIn’s revenue has never declined sequentially, but if the guidance turns out to be accurate, this will be a first for the professional networking site. Analyst estimates also seem to be factoring in a sequential drop at a Q1 projection of $636 million. LinkedIn’s CFO Steve Sordello outlined the reasons for the lower projection in LinkedIn’s earnings call. LinkedIn expects to deliver adjusted EBITDA of $152-154 million implying a drop in profitability. For FY 2015 LinkedIn expects a revenue of $2.93 - $2.95 billion and a non GAAP EPS of $2.95.
Following its near 11% rally post Q4 earnings, LinkedIn now trades at a Price to Sales ratio of 14.7. LinkedIn valuations are expensive given its lack of profitability. If revenue growth does slow down significantly in Q1, LinkedIn’s valuations could take a hit. At these valuations, LinkedIn could be a risky bet.
LinkedIn Earnings Q4 2014 Preview
Published on 29 Jan 2015.
- LinkedIn Earnings For Q4 2014 are due on 5 Feb 2015.
- LinkedIn is likely to surpass its conservative guidance for Q4 2014.
- LinkedIn valuations are steep going into Q4 earnings.
LinkedIn earnings for Q4 2014 are due to be reported on Feb 5 2015, post market hours. LinkedIn’s revenue guidance for Q4 doesn’t make for exciting reading, though this could be just another conservative estimate by the company. Analysts expect a slightly higher growth rate from the professional networking site. Last time around, post Q3 LinkedIn earnings, the stock price spiked by close to 13%, but has moved lower since then. Given that LinkedIn’s profitability has gotten worse in recent quarters, LinkedIn valuations seem to be steep and could make the stock a risky bet ahead of Q4 earnings.
LinkedIn Earnings Schedule
- LinkedIn Earnings Date - 5 Feb 2015
- LinkedIn Earnings Release - 4 PM EST
- LinkedIn Earnings Call - 5 PM EST
LinkedIn Earnings Analyst Estimates Q4 2014
|Q4 2014||Estimates||YoY Growth Projection|
|LinkedIn Revenue ($ million)||616.93||38%|
|LinkedIn Earnings Per Share (Non GAAP EPS - $)||0.53||36%|
Source: LinkedIn Q4 Analyst Estimates LinkedIn’s Q4 guidance pegs revenue at $600 - $605 million, representing a YoY growth of 34% - 35%. LinkedIn expects to deliver a Non GAAP EPS of $0.49 a share. Analysts expect more from LinkedIn (NYSE:LNKD) on both fronts in Q4.
LinkedIn Earnings Q3 2014 Recap
In Q3, LinkedIn registered a YoY growth of 44.6%, adding $34.4 million during Q3, to end the quarter with a revenue of $568 million. LinkedIn revenue grew strongly across segments with growth in “Talent Solutions”, “Marketing Solutions” and “Premium Subscriptions” ranging from 43% to 45% each. In June 2014, a cheaper LinkedIn subscription option, “Spotlight”, was introduced to aid growth in this segment. However, subscriptions revenues continue to grow at a slower rate compared to LinkedIn’s other revenue segments, and contribute about 20% of revenue, a number that hasn’t changed for several quarters. In LinkedIn’s earnings call post the Q3 earnings release, the company mentioned that it would be implementing a price hike in its Talent Solutions segment. However, that will take effect in 2015, and won’t impact Q4 results for LinkedIn. LinkedIn’s performance was strong across metrics:
|Q3 Numbers||YoY Growth (%)||Absolute addition|
|LinkedIn Member Base (millions)||332||28%||18.6|
|LinkedIn Unique Visiting Members (millions)||90||16%||5.8|
|LinkedIn Mobile Unique Visiting Members (millions)||42||45%||4.5|
|LinkedIn Member Page Views (billions)||28||28%||2.6|
LinkedIn profit margins have declined over the last few quarters. LinkedIn never had huge profit margins, but profitability has slipped from consistently positive to consistently negative, low single digits. In Q3, LinkedIn operating profit and net loss margins came in at 1.5% and 0.7% respectively. You can also see our LinkedIn stock analysis video to get a quick roundup of LinkedIn’s key fundamentals post Q3 2014.
We said this a year ago in our LinkedIn earnings review of Q4 2013, and several times thereafter, and our view remains unchanged even today, LinkedIn valuations are expensive. At $220 a share, LinkedIn valuations are as below:
- LinkedIn Price To Sales Ratio – 13.66
- LinkedIn PE Ratio – N/A
LinkedIn isn’t growing at a maddening pace, and given LinkedIn’s profitability, or the lack of it, LinkedIn valuations remain steep. Observe in the chart below, how LinkedIn’s stock price is almost exactly where it was at the beginning of 2014. Since Jan 2014, LinkedIn’s stock price has gained a mere 1.7%, and if sanity prevails in the stock markets, that might well be the case in the coming 12 months as well. LinkedIn stock chart by amigobulls.com LinkedIn doesn’t make any profits currently, and it’s difficult to see how that’s going to change drastically. For a while, LinkedIn hasn’t had any ominous competition, but if Facebook starts competing with LinkedIn, that dynamic is going to change as well. The latest updates suggest that Facebook is taking the professional networking opportunity seriously, and LinkedIn is trying to come up with enterprise solutions that Facebook is believed to be developing. LinkedIn China does provide LinkedIn with a huge opportunity, which peers like Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) don’t have currently. However, if Facebook does manage a backdoor entry with its professional networking service, that won’t be true anymore. We won’t be surprised to see an earnings beat from LinkedIn on Feb 5th, especially with the rather conservative guidance for Q4 2014. However, at these valuations, we would prefer to sit out a rally, should there be one.