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Earnings Watch: LinkedIn’s Metrics Matter

Published 07/31/2014, 01:09 PM
Updated 07/09/2023, 06:31 AM

LinkedIn Corporation (NYSE:LNKD) is set to report FQ2 2014 earnings after the market closes on today. LinkedIn is the largest social network designed specifically for professionals and networking. So far this earnings season the social networks have been leaders. Facebook, Twitter, and Yelp all posted outstanding earnings relative to their own respective expectations. LinkedIn will be the next social network to report earnings, here’s what investors are looking for.

Consensus Estimates

This quarter 73 contributing analysts on Estimize.com have come to a consensus earnings expectation of 40c EPS and $514.81M in revenue compared to a consensus of 39c EPS and $511.83M from Wall Street.

LinkedIn Historic Earnings Per Share

LinkedIn’s earnings have been extremely flat over the previous 4 quarters. This quarter there has been a huge uptick in social media companies’ earnings, in large part due to a boost in mobile advertising revenue. The consensus on LinkedIn from Estimize is still fairly modest this quarter compared to the great reports from the other social media companies. However, the range of estimates from the community reaches particularly high this quarter. A wide range of EPS estimates is often indicative of uncertainty in the market, and could mean greater volatility post earnings.

Yelp Historic Earnings Per Share

Facebook (NASDAQ:FB), Twitter (NYSE:TWTR) and Yelp (NYSE:YELP) have all made huge moves after reporting earnings. In the day after reporting earnings shares of Facebook were up 5%, the price of Twitter stock soared 20%, and so far in midday trading shares of Yelp have plummeted 11% despite the better than expected earnings.

Ratings and reviews site Yelp signed up fewer businesses this quarter than in the previous one. This was the first time in the past year and a half that Yelp posted a year over year decline in the number of businesses added to the platform. On the other hand the biggest mover to the upside, Twitter, breezed past its key performance indicator, the number of monthly active users on the platform. Pressure is mounting on  the social media platforms to not only maintain their outrageously high revenue growth rates, but also to continuously improve key metrics.

LinkedIn Historic Revenue

While LinkedIn’s earnings may have flattened off, revenue has been increasing quickly and steadily. Over the past year LinkedIn has been averaging year over year revenue growth of about 50%. Already this quarter we have seen breakout earnings from Facebook, Twitter, and Yelp. The general trend is that social media platforms are starting to flip switch on the bottom line and bring in higher profits. The trend has been particularly pronounced because of the proliferation of smartphones and soaring mobile engagement statistics.

Outlook: Estimize Vs. Wall Street

Contributing analysts on the Estimize.com platform are forecasting that on Thursday LinkedIn will earn a penny per share more than Wall Street is predicting and beat the Street’s revenue consensus by $3 million (<1%). The Estimize community is expecting LinkedIn to post year over year revenue growth of 42% while earnings increase by 2c per share compared to the same quarter of last year.

When LinkedIn reports after the close, reporting in-line will the Wall Street consensus will not be good enough. All of the other social media stocks are going crazy right now and demolishing the Wall Street numbers, LinkedIn will be expected to keep up. As we saw with Yelp and Twitter, key performance indicators have become just as important as solid earnings.

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