LinkedIn’s Stock Inching Towards Its True Value As Growth Slows

LinkedIn‘s stock has retreated roughly 20% since mid-September, with some of the decline coming post Q4 2013 earnings announcement when the company missed consensus estimates. We have stated on many occasions that even though LinkedIn has a good business model and there is strong potential to expand, the market is valuing the stock very steeply. The fourth quarter results reinforced this belief to some extent as there were signs of slowing growth. The outlook for 2014 didn’t impress the market either and shares tanked by more than 6%. The company plans to make some strategic investments to fuel growth, including: 1) expanding in China; 2) creating world economic graph to map 3 billion workers; and, 3) making efforts to increase user engagement on mobile devices. However, these initiatives could lead to short-term cost pressure, in our view.


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