Linkedin: Zacks’ Bear of the Day Play

Linkedin (LNKDAnalyst Report) is a Zacks Rank #5 (Strong Sell) is an online professional network which allows members to create, manage, and share their professional identity online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities.

The company has a market cap of $16 Billion and sports a Zacks Style Score of “F” in Value. The stock does have a Style Score of “A” in Growth and Momentum, but that growth is coming into question after the company reported earnings on February 4th.
Q4 results

The company guided Q1 much lower, with EPS seen at $0.55 verse the $0.72 expected and fiscal year 2016 now seen at $3.05-3.20 verse the $3.73 expected. These are not the numbers investors want to see from a growth company with a high multiple. The stock fell from $195 to $97.50 a share in the days after earnings, a 50% haircut.

Since the earnings report, the stock has bounced over 20%, giving investors an opportunity to exit the stock. Short sellers should start selling at current levels and position themselves for a test of the post earnings lows. The table below shows revisions are coming in significantly lower, which will keep pressure on the stock.

Estimate Revisions

Over the last month estimates have come down significantly. Fiscal year 2017 estimates have come down from $3.02 to $0.81, while revisions have taken down the 2016 to $-.26 from $.75. Every time period within the last year has been revised lower, until these numbers turn around the stock should be avoided.

Reasons to sell

Some reasons to be nervous about the prospects of LNKD include: the threat from Facebook(FBAnalyst Report) to enter market, security of users, fake users, and a negative impact on margins due to increased investments.

A Better Option

Etsy (ESTY) is Zacks Rank #1 (Strong Buy) that offers its customers and clients e-commerce services.  It provides online and offline marketplaces to buy and sell goods like art, home and living, mobile accessories, jewelry, wedding, and others. Its industry that ranks strongly, currently ranked 95 out of 265 (Top 36%).

The company has been sold hard since its IPO, but is looking attractive here for the long term. Over the last 90 days, estimates for fiscal year 2017 have been revised higher from -$0.02 to $0.07.

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