LinkedIn Shares Tumble on Weak Forecast for 2016

The company recently concluded 2015 on a strong note with better-than-expected results for the fourth quarter. Adjusted earnings per share was 94 cents, well above the 78 cents expected.

While the company beat analyst estimates on both income and revenue, the stock quickly tumbled 25% in after-hours trading, due to a disappointing outlook and earnings guidance. “This thing moves a lot on earnings”, he said. The company witnessed a 7% year-over-year increase in unique visiting members and a 26% rise in member page views.

LinkedIn’s efforts to get professionals enthused about its social network do not seem to have worked out to the expectations of investors.

LinkedIn expects sales to reach $820 million in the first quarter, which is lower than the $866 million that analysts surveyed by Thomson Reuters forecast. The question here is how it’s audience is shifting and why analysts are asking if the company has skill in making acquisitions and integrating them.

LinkedIn has been going through a time of major change and some challenges, as it seeks to introduce new products and adjusts to the recent acquisition of the video training company, Lynda.com.

LinkedIn Corp (NYSE:LNKD) was downgraded by equities researchers at RBC Capital from an “outperform” rating to a “sector perform” rating in a research note issued to investors on Friday, The Fly reports. In addition, increasingly more members are using LinkedIn to search career opportunities, benefited from key member investment throughout 2015 such as increased job listings and the jobs app.

“The acquisition of Connectifier, announced this afternoon, will further strengthen our core products and accelerate our product roadmap, leveraging powerful machine learning-based searching and matching technology to help recruiters and hiring managers find the flawless talent fit”, LinkedIn said in the earnings statement. Marketing Solutions revenue of $183mn (+20% yoy vs. +28% in 3Q) was slightly above consensus of $180mn.

Revenues from premium subscriptions were up 19pc to $144m.

Although the professional social networking site has a completely different revenue model from the other popular social network giants, Twitter and Facebook, analysts still warn of potential competition. The company’s stock fell by almost $40 within 10 minutes and finally closed at $137.11, down from $192.62 before the announcement of the results and the predictions.

LinkedIn claimed 414 million users in December, a gain of 18 million in three months and 67 million in one year.