By Supantha Mukherjee and Anya George Tharakan
(Reuters) - LinkedIn Corp's (N:LNKD) shares closed down 43.6 percent on Friday, wiping out nearly $11 billion of market value, after the social network for professionals shocked Wall Street with a revenue forecast that fell far short of expectations.
The stock plunged as much as 46.5 percent to a more than three-year low of $102.89, registering its sharpest decline since the company's high-profile public listing in 2011.
The rout in the stock cost LinkedIn chairman Reid Hoffman about $1.2 billion based on his 11.1 percent stake in the company he co-founded, according to Reuters calculations.
At least nine brokerages downgraded the stock to "hold" from "buy", saying the company's lofty valuation was no longer justified.
"With a lower growth profile, we believe that LinkedIn should not enjoy the premium multiple it has grown accustomed to," Mizuho Securities USA Inc analysts wrote in a note.
At least 36 brokerages cut their price targets, with Pacific Crest halving its target to $190. Their median target dropped 34 percent to $188, according to Reuters data.
LinkedIn forecast full-year revenue of $3.60-$3.65 billion, missing the average analyst estimate of $3.91 billion, according to Thomson Reuters I/B/E/S.
"This would imply that LinkedIn will grow around 15 percent in 2017 and 10 percent in 2018," Mizuho analysts said.
Underscoring the slowdown in growth, LinkedIn said online ad revenue growth slowed to 20 percent in the latest quarter from 56 percent a year earlier.
Adding fuel to the selloff was the release of the U.S. monthly jobs report, which showed employment gains slowed more than expected in January.
LinkedIn's hiring business, called Talent Solutions, is the company's biggest unit by revenue.
"It's not a great day to have reported tough guidance," said Randle Reece, an analyst with Avondale Partners LLC. "The mediocre employment report from the Labor department just amplified the reaction of anything employment sensitive today."
RBC analysts said they had thought LinkedIn was on the cusp of "fundamentally positive" change.
"We were wrong," they said in a client note.
LinkedIn's disappointing forecast and a weak forecast from data analytics software maker Tableau Software Inc (N:DATA) reverberated through the tech sector on Friday, sending the Nasdaq Composite (IXIC) down more than 3 percent.
BLOATED VALUATIONS
As of Thursday, LinkedIn shares were trading at 50 times forward 12-month earnings, making it one of the most expensive stocks in the tech sector.
Twitter Inc (N:TWTR) trades at 29.5 times forward earnings, Facebook Inc (O:FB) at 33.8 times and Alphabet Inc (O:GOOGL) at 20.9 times.
Even after the selloff, LinkedIn's shares may still be overvalued, according to Thomson Reuters StarMine data.
LinkedIn should be trading at $71.79, a 30 percent discount to the stock's Friday's low, according to StarMine's Intrinsic Valuation model, which takes analysts' five-year estimates and models the growth trajectory over a longer period.
LinkedIn has been spending heavily on expansion by buying companies, hiring sales personnel and growing outside the United States, but is now facing pressure in Europe, the Middle East, Africa and Asia-Pacific due to macro-economic issues.
"Given those macro concerns and LinkedIn's recent execution issues, we expect investors will demand financial outperformance before there is meaningful recovery in LNKD's multiple," Goldman Sachs (N:GS) analysts wrote in a client note.
Up to Friday's close, LinkedIn stock had already lost just over half its value so far this year.