NEW YORK (TheStreet) -- I have a LinkedIn (LNKD) profile. I haven't put much time into it. There's a lot of stuff (speaking gigs, teaching) that I haven't put on there. I get connection requests from people, I generally accept them, but I don't write status updates, I don't send people InMail, and my profile just sits there, waiting for people to stalk me.
Stalk me they do. Apparently mine was in the top 5% of all viewed profiles in 2012. It's like being listed in the White Pages.
This is where I received the you just don't get it lecture from one of my readers, about how powerful a tool LinkedIn is. Yeah, I don't think so, not anywhere near Facebook (FB), which stores photos and videos and has its own Messenger and Graph Search and all that stuff. In LinkedIn you can endorse people's skills; more than 30 people have endorsed me for Equities and Hedge Funds, among other things. My skill list makes me look like I'm a character in the role-playing game Fallout. It's kind of silly.
LinkedIn is a silly stock and a silly company that, admittedly, in the beginning, made more investment sense than Facebook because it had a solid revenue model. But what people never considered was that the revenue model was nowhere near as scalable as Facebook's was. And that rate of growth plainly starts to slow down after most people in the business world have already signed up. If I'm going to bet who has more tricks up their sleeve at this point, it's Facebook.
For the record, I sold Facebook about two weeks ago and I recently bought puts on LinkedIn. I think that all of Silicon Valley is getting silly at this point, with a level of opulence even exceeding what was going on 15 years ago. Things are to the point where California, considered bankrupt and ungovernable four years ago, with its public finances in a shambles, is once again swimming in tax revenues. Real estate has reached levels that are, well, totally insane. It really is silly season.
Back to LinkedIn, I am not the first to observe that the price action is beyond sloppy, with the chart clearly rolling over and breaking trend. LinkedIn has turned out to be a pretty good tell for all of Silicon Valley -- it led the social networking names on the way up and will probably lead them on the way down. It earns money -- but really not that much, with top line at about $400 million a quarter.
For perspective, that means that it earned less than one half of what the second floor of the Lehman Brothers building made back when I worked there. This is a company whose importance (and headquarters) is way out of proportion to the revenue that it actually earns.
Once people figure out that growth is slowing, they will take a look at what this thing earns on an ongoing basis. Frankly, at about a 700 P/E, there isn't much of a valuation cushion. The stock could fall pretty far. Longer-dated puts (six months and out), slightly out of the money, seem to be the best strategy.
--By Jared Dillian.