LinkedIn shares lose €8bn in value on shock revenue forecast

LinkedIn’s shares plunged about 35% yesterday, wiping out nearly $9 billion (€8bn) of market value, after the social network for professionals shocked Wall Street with a revenue forecast that fell far short of expectations.

The stock sank to a three-year low of $124.51 at one stage, registering its sharpest decline since the company’s high-profile public listing in 2011. 

The company is building a huge head office in Dublin to handle its business outside North America.

At least seven brokerages downgraded the stock from “buy” to “hold” or their equivalents, saying the company’s lofty valuation was no longer justified.

“With a lower growth profile, we believe LinkedIn should not enjoy the premium multiple it has grown accustomed to,” Mizuho Securities USA analysts wrote. 

Mizuho downgraded the stock to “neutral” and slashed its target price to $150 from $258. 

Raymond James, Cowen, BMO Capital Markets, JPMorgan Securities and RBC Capital Markets also downgraded the stock. 

At least 22 brokerages cut their price targets on the stock, with RBC slashing its target by almost half to $156.

LinkedIn forecast full-year revenue of $3.60bn to $3.65bn, missing the average analyst estimate of $3.91bn.

“This would imply LinkedIn will grow around 15% in 2017 and 10% in 2018,” the Mizuho analysts said. Underscoring the slowdown in growth, LinkedIn said online ad revenue growth slowed to 20% in the fourth quarter from 56 percent a year earlier. 

RBC analysts said they had thought LinkedIn was on the cusp of “fundamentally positive” change. “We were wrong,” they said in a client note. 

As of Thursday, LinkedIn shares were trading at 50 times forward 12-month earnings versus Twitter’s 29.5 times, Facebook’s 33.8 and Alphabet’s 20.9, making it one of the most expensive stocks in the technology sector. 

Facebook, Alphabet and Amazon are better picks for investors than LinkedIn, Evercore analysts wrote.

LinkedIn has been spending heavily on expansion by buying companies, hiring sales personnel and growing outside the US, but is now facing pressure in Europe, the Middle East, Africa and Asia-Pacific due to macro-economic issues.

LinkedIn shares have lost nearly a quarter of their value in the last three months. 

— Reuters


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