LinkedIn (LNKD) Drops as Investors Worry Over Washington

NEW YORK (TheStreet) -- LinkedIn (LNKD) shed 6.8% to $221.13, as of 1:50 p.m. New York time. The company has traded between $218 and $237.36, after opening the day at $237.34. The company is lagging the S&P 500 which is down 0.54%.

LinkedIn, one of the biggest gainers of the year so far, was one of several Internet stocks falling on Tuesday, as investor worries over the current political uncertainty in Washington plagued the market.

Now in its eighth day, the government shutdown is a result of a deadlock among Congressional leaders to agree on a new budget. Investors are also concerned the government will default on its debt obligations if it fails to raise the debt ceiling by October 17.

"Many of the recent winners are breaking key levels," said 'Real Money' contributor James 'Rev Shark' DePorre in his analysis Tuesday. "It is very likely that many of these stocks will bounce back sharply at the first hint of some sort of Washington deal."

TheStreet Ratings team rates LinkedIn Corp as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate LinkedIn Corp (LNKD) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Internet Software & Services industry and the overall market, LINKEDIN CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for LINKEDIN CORP is currently very high, coming in at 86.45%. 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 1.02% is significantly lower than the industry average.
  • Compared to its closing price of one year ago, LNKD's share price has jumped by 101.4%, 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 reported flat earnings per share in the most recent quarter. 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 19 cents a share vs. 11 cents a share in the prior year. This year, the market expects an improvement in earnings ($1.53 vs. 19 cents).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Internet Software & Services industry average. The net income increased by 32.8% when compared to the same quarter one year prior, rising from $2.81 million to $3.73 million.

Written by Keris Alison Lahiff.