NEW YORK (TheStreet) -- Shares of LinkedIn Corp. (LNKD) are up 1.58% to $223.25 in pre-market trading after Wells Fargo initiated coverage on the online professional network with an "outperform" rating and a valuation range of $260 to $270.
"Though the competitive landscape is fierce, we view LinkedIn as a pioneer in building the largest professionally oriented social network, where benefits accrue to active members, employers and b-to-b marketers," Wells Fargo said.
By acting as the professional identity of record for hundreds of millions of professionals, analysts believe LinkedIn has built a valuable "clean signal" data layer, accelerating the concept of "passive recruiting", and becoming a critical must-have tool for enterprise talent professionals.
Beyond recruitment, Wells Fargo sees substantial opportunity for LinkedIn's marketing and sales solutions propelled by the company's recent success in building out a content publishing platform.
"Our base case model assumes LNKD will post a 31% 2014-2016 revenue CAGR, while growing adjusted EBITDA margin to 28.4% in FY'16 from an estimated 26.3% for FY'14. Our base case model calls for non-GAAP EPS (ex SBC) of $1.96 in FY'14 and $2.58 in FY'15," Wells Fargo analysts said.
"The midpoint of our valuation range equates to 40.2x and 31.4x our FY'15 and FY'16 EBITDA estimates, respectively, representing a premium valuation to the mid-range of our coverage group. We believe a premium is merited given LNKD's dominant U.S. position, multi-segment revenue opportunity, and international growth optionality," they added.