NEW YORK (TheStreet) - LinkedIn (LNKD) shares tanked 5.63% to $152.15 in Friday trading as investors digested the company's first-quarter results and weaker-than-expected guidance. Wall Street, however, remained a big fan of the professional social network.
The Mountain View, Calif.-based firm reported first-quarter revenue of $473.2 million, a 46% hike on the prior year's quarter, and comfortably above Wall Street's estimate of $467 million.
Excluding items, LinkedIn earned 38 cents a share on net income of $47.3 million, compared to 45 cents a share and $52.4 million in the prior year's quarter. Analysts were looking for earnings of 34 cents a share.
LinkedIn's talent solutions revenue climbed 50% year over year to $275.9 million and its marketing solutions revenue rose 36% to $101.8 million over the same period. Premium subscriptions revenue increased 46% to $95.5 million.
Set against this backdrop, analyst sentiment toward LinkedIn's numbers has been largely positive, with UBS upgrading the company to "buy" from a prior "neutral" rating. UBS cited LinkedIn's sustainable first mover advantage as a social network for the professional community.
Stifel analyst Michael B. Purcell, however, noted that the company did not provide any update on its total member counts in China, which could have served as a catalyst for the stock. Stifel nonetheless maintained its LinkedIn "buy" rating, citing the platform's relevance and utility, but lowered its price target to $240 from $285 on slightly lower multiples.
The company's guidance has spooked investors. For the second quarter, LinkedIn said it expects revenue between $500 million and $505 million and adjusted EBITDA of $118 million to $120 million. Analysts surveyed by Thomson Reuters were looking for sales of $505.1 million and EBITDA of $120.34 million.
For the full year, LinkedIn predicts revenue between $2.06 billion and $2.08 billion and adjusted EBITDA between $505 million and $510 million. Wall Street had predicted full-year sales of $2.11 billion and EBITDA of $514.37 million.
Here's what analysts are saying about LinkedIn's first-quarter numbers:
Evercore analyst Ken Sena (Overweight, $240 Price Target)
"LinkedIn reported strong 1Q14 earnings, with revenue performance across business segments, margins, and a raised FY guide all better than expected. We continue to like shares and see new content programs, tool capabilities, and geographic opportunities as offering an expansive addressable market on a business with strong competitive barrier and scalable margin potential. However, we do concede that some volatility in shares is likely to remain as engagement growth metrics compress through 2Q14 & 3Q14 on tougher comps and a shift in specific customer focus across business segments show some evolution."
Stifel analyst Michael B.Purcell (Buy, $240 Price Target)
"Overall results slightly exceeded expectations and the annual outlook was raised. Talent Solutions was very solid, posting $30mn q/q increase revenue, an appreciable increase in deferred revenues, and management for the first time offered insight into gross ads which indicated lower churn than previously assumed. The results might not be enough to sharply reverse the recent weakness in shares, but is likely sufficient to stem the declines and re-start investment sentiment to the positive."
Credit Suisse analyst S.Ju (Outperform, $270 Price Target)
"Despite the raised FY guide in excess of the 1Q14 beat for both revenue and EBITDA, we expect investor attention to be fixed on Talent Solution client add deceleration. This was offset by higher ARPU flowthru from the price hike implemented last year, hence our segment estimates march modesty higher. Our main incremental growth driver focus has been on Sales Navigator, but we now believe there is increased upside potential from Marketing Solutions on potentially increased engagement due to differentiated content from its publishing platform."
Topeka Capital Markets analyst Victor Anthony (Buy, $230 Price Target)
"We still see an opportunity for more beat and raise quarters with guidance that could top Street expectations. The shares offer a compelling risk-reward, with approximately 40% upside to our price target. Longer-term we see LinkedIn benefiting financially from investments in R&D, Sales Solutions, Sponsored content, and China."
UBS analyst Eric J. Sheridan (Buy, $225 Price Target)
"Since its Q3 '13 earnings print, LNKD has underperformed the S&P 500 by ~4100 bps as investors digested a mix of slower (albeit still very solid) revenue growth & less margin leverage in 2014. We believe the stock at these levels (after that underperformance) presents a very compelling risk/reward."
Sterne Agee analyst Arvind Bhatia (Neutral)
"We recognize near-term headwinds but like the long-term outlook. The stock's pullback (~40% from its 52-week high) increasingly reflects near-term concerns as LNKD is now trading at a discount to its high-growth peers on EV to Sales. 1Q'14 results exceeded expectations and management raised full year guidance."
Read More: LinkedIn Swings to Loss, Guides Revenue Light
Read More: LinkedIn Slips on Lowball Guidance Yet Again
-- Written by James Rogers in New York.
>Contact by Email.