LinkedIn Surges: What Wall Street Is Saying

NEW YORK (TheStreet) -- LinkedIn (LNKD) connections proved to be in high demand and helped boost the company's profits over the last quarter. LinkedIn's earnings beat Street estimates after its second quarter saw strong user growth, increased professional engagement and launch of new products leading to enthusiastic investors and a surging stock price.

Despite a controversy earlier in the quarter, LinkedIn faced a privacy rights lawsuit in June due to the company hacking its customers' external e-mail accounts, LinkedIn's business model proved to be strong. The company reported that the number of members increased 32% year over year.

Read more: Facebook and LinkedIn Slapped on The Wrist for Privacy

The 300 million and growing user base supported revenue growth throughout the quarter. The site's provided recruiting tool, Talent Solutions, saw revenue increase to $322 million up 49% compared to second quarter 2013. LinkedIn's Premium Subscriptions, which helps users connect to careers and LinkedIn companies find talent among other career advantages, increased 44% year over year to $105.2 Million.

LinkedIn's revenue for the second quarter was $534 million beating analysts expectations of $511 million. The Santa Monica, Calif.-based company saw an increase of 47% compared to $364 million in its second quarter of 2013. LinkedIn reported earnings of 51 cents per share above analysts' estimates by 12 cents a share and up from 38 cents a share in the second quarter 2013.

In an official statement released Jul. 31 with LinkedIn's second quarter report, Company CEO, Jeff Weiner attributed the leading professional network's profit growth to strategic moves in providing connections and subscription-based career assistance to LinkedIn's active online professionals.

"LinkedIn delivered strong financial results in the second quarter while maintaining investment in our member and customer offerings," said Weiner. "We made significant progress against several key strategic priorities including increasing the scale of job opportunities on LinkedIn; expanding our professional publishing platform; and continuing the strategic shift towards content marketing through Sponsored Updates."

LinkedIn profiting off of professionals searching to advance their careers saw success when integrating Sales Navigator, a new enterprise product tool for social hiring, into its network. Analysts were optimistic about the future for the latest update of Sales Navigator, which saw a bump in price from $700 a year to $1,200.

Investors responded with enthusiasm with shares rising as much as 13% after the results on Thursday. Shares were rising 9.97% to 198.65 on Friday.

Proving investors' previous concerns about revenue wrong, LinkedIn forecasts revenue ranging between $2.14 billion and $2.15 billion for the full year.

Cantor Fitzgerald analyst Youssef Squali (Buy, $250 PT)

We're maintaining a BUY rating and raising our PT to $250 from $225 on the back of strong 2Q:14 results, with revenue/EBITDA exceeding consensus estimates by 4%/19%, respectively. Guidance was also solidly ahead of expectations. Sustainable growth in corporate customers and ARPU, strong user growth/engagement and new products roll out should continue to drive outsized revenue growth/margin expansion over time.

Credit Suisse analyst Stephen Ju (Outperform, $257 PT)

We believe strong growth in Talent Solutions customers will lay to rest fears of market saturation that had surfaced following 1Q earnings - with investors again focusing on growth and the opportunities for expansion in both product lines and geographies. We continue to focus on Sales Navigator as the next incremental growth driver, which launched earlier-than-expected - management indicated this should ramp quickly by year-end. We maintain our Outperform rating on the following: 1) large and expanding addressable markets, 2) still-low penetration rate for Talent Solutions, 3) LT opportunity to find additional use cases (and monetization vehicles) for its unique data set.

Jefferies analyst Brian Pitz (Buy, $300 PT)

We reiterate our Buy on LNKD. Revenue continues to expand meaningfully in all segments; and yet the opportunity ahead is still very large and valuation compelling, with ~65% potential upside to our new $300 PT. Talent Solutions grew revenue +49% YY to $322.2M, vs. $294.9M for Street, including an $18M reclassification from Marketing Solutions. Ex-reclassification, segment revenue would have increased 48% YY and +3% over Street. LNKD added 2.2k net corporate customers during 2Q14, bringing the new total to over 28.1K. In May, The company began testing Limited Listings to grow the number of job listings available on LNKD. There are now more than 1MM jobs posted, vs. ~300k a few months ago. (please see charts 1 and 2 for Talent Solutions Market Size).

J.P. Morgan analyst Doug Anmuth (Overweight, $241 PT)

We are encouraged by LinkedIn's success in deepening existing Talent Solutions relationships, as revenue per customer per month accelerated to 5.8% Y/Y, despite growth in SMB accounts-and we believe significant headroom remains. We believe Sponsored Updates continue to support solid Marketing Solutions growth driven by improvements to engagement, inventory, pricing, and sell-through rate. LinkedIn beat the high end of EBITDA guidance and consensus estimates by ~20% despite continued heavy investments. We believe these investments are important drivers of long-term growth, including China, engagement efforts, job postings, mobile, Sales Navigator, and integration of new acquisitions. The company raised its full-year revenue guide by $75M (4%) and EBITDA by $40M (8%). We maintain our Overweight rating and we are establishing a year-end 2015 price target of $241

Bank of America Merrill Lynch (Neutral, $225 PT)

LinkedIn had another solid execution quarter, and while company could continue to deliver upside to guidance, we still prefer FB (C-1-9, $72.65) for growth vs valuation. We are raising our price objective to $225 (up from $215), based on 80x 2015E P/E (about 2.0x growth). Our price objective represents 32x 2015 EBITDA and 9.6x P/S.

--Written by Kathryn Mykleseth in New York

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