Why LinkedIn (LNKD) Stock Is Falling Today

NEW YORK (TheStreet) -- LinkedIn (LNKD) shares are down -1.8% to $166.96 in trading on Thursday after Barclays initiated coverage on the stock with an "equal weight" rating.

The firm also set a $175 price target on the company's shares, suggesting 3% upside from the LinkedIn's opening price Thursday.

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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 multiple 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 company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself."

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

  • 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 159.4% when compared to the same quarter one year ago, falling from $22.62 million to -$13.45 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 share price of LINKEDIN CORP has not done very well: it is down 7.73% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The gross profit margin for LINKEDIN CORP is currently very high, coming in at 86.80%. 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 -2.84% significantly underperformed when compared to the industry average.
  • 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 $0.23 versus $0.19 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $0.23).
  • You can view the full analysis from the report here: LNKD Ratings Report
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