LinkedIn Stock Tanks, Despite Solid Earnings

Shares of LinkedIn stock have tanked, despite better than expected fourth quarter earnings. Although LinkedIn “beat the street” for Q4 2015 earnings, the company’s bleak outlook for 2016 likely contributed to the falling share price. Shares of LinkedIn stock had fallen nearly 30 percent on Thursday.

In the fourth quarter of 2015, the company reported earnings of $862 million in revenue and earnings per share of 94 cents. This beat analysts’ expectations of $857.6 million in reported fourth quarter earnings and according to Recode.net, this marks a 39 percent improvement from LinkedIn’s performance at the same time last year.

LinkedIn’s earnings were not the only thing that performed well in 2015. The professional social network’s user base totaled around 414 million members at the end of the fourth quarter 2015. This was a 19 percent increase from the same time last year.

But despite all this positive growth and earnings news, LinkedIn’s 2016 forecast came in a bit lower than analyst expectations, which was likely the cause of the stock price falling.

At the same time as their earnings announcement, LinkedIn issued a statement about their 2016 outlook. The 2016 outlook forecasts an anticipated $820 million in revenue for the first quarter in 2016 and $3.6 billion for the entire year. The projected earnings per share for Q1 2016 is only 55 cents, which is lower than the analyst estimates of 74 cents earnings per share.

The nearly 30 percent decrease in LinkedIn share price marks the stock’s lowest point in nearly three years, although the stock has been on a bit of a roller coaster ride over the last few years. Last spring, LinkedIn stock also took a tumble when the company lowered it’s revenue forecasts.

“LinkedIn CFO Steve Sordello said on the earnings conference call, “We’re making good progress on our initiatives. Our focus is on investing intelligently to capture the large, addressable opportunity ahead of us.”

“We enter 2016 with increased focus on core initiatives that will drive leverage across our portfolio of products,” LinkedIn CEO Jeff Weiner said, echoing Sordello’s comments.

LinkedIn has been going through a time of major change and some challenges, as it seeks to introduce new products and adjusts to the recent acquisition of the video training company, Lynda.com.

According to Investor, LinkedIn paid a reported $1.5 billion for Lynda.com last April. LinkedIn also rolled out a new mobile app, Voyager, last December,which was designed to be more intuitive and user friendly.

At the present moment, LinkedIn has three revenue streams. The first revenue stream is Talent Solutions, which is used mostly by companies or recruiters to recruit potential employees. LinkedIn’s second revenue stream is Marketing Solutions, which sells advertisements. The last revenue stream is Premium Subscriptions, which are fees paid by users for enhanced LinkedIn services.

Although the professional social networking site has a completely different revenue model from the other popular social network giants, Twitter and Facebook, analysts still warn of potential competition. Facebook may be trying to steal a piece of the LinkedIn pie, as they just launched a new service that allows employees of a company to chat with their colleagues. Companies like Glassdoor are also considered competition, as they are competing for some of the same market share.

It will be interesting to see how the Lynda.com acquisition plays out for LinkedIn throughout 2016 and whether or not the company will beat analysts predictions for Q1 earnings in a few months.

[Photo credit: Getty Images/dowell & bubaone]