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LinkedIn (LNKD) Is Water-Logged And Getting Wetter Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified LinkedIn ( LNKD) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified LinkedIn as such a stock due to the following factors:

  • LNKD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $92.6 million.
  • LNKD has traded 1.3 million shares today.
  • LNKD traded in a range 1979.3% of the normal price range with a price range of $189.88.
  • LNKD traded below its daily resistance level (quality: 531 days, meaning that the stock is crossing a resistance level set by the last 531 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on LNKD:

LinkedIn Corporation operates an online professional network. LNKD has a PE ratio of 745.6. Currently there are 14 analysts that rate LinkedIn a buy, no analysts rate it a sell, and 12 rate it a hold.

The average volume for LinkedIn has been 2.1 million shares per day over the past 30 days. The stock has a beta of 1.58 and a short float of 3.9% with 1.16 days to cover. Shares are up 94.8% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates LinkedIn as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 246.1% when compared to the same quarter one year ago, falling from $2.30 million to -$3.36 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, LINKEDIN CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for LINKEDIN CORP is currently very high, coming in at 86.41%. Regardless of LNKD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LNKD's net profit margin of -0.85% significantly underperformed when compared to the industry average.
  • Compared to its closing price of one year ago, LNKD's share price has jumped by 109.17%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • LINKEDIN CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LINKEDIN CORP increased its bottom line by earning $0.19 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $0.19).

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