Linkedin Stock To Buy or Not To Buy
Rapid growth, astounding numbers, consistent profitability, 225 million registered numbers, this has to be a buy right? Its a no brainer. Well not exactly, lets dig a little bit deeper, I will explain to you why its not a complete “no brainer” buy; and ultimately tell you whether or not you should pickup Linkedin Stock.
The Pros of Linkedin Stock
- Stock is up 59% in 2013
- Investors who bought at IPO for $45 have seen 306% gains
- Total Revenue at $972 million
- Linkedins upper management
- Multiple revenue sources (Ads, Paid Memberships, Hiring)
- Growth in all areas
Okay so lets break it down in a little more detail. Linkedin has been able to do what a number of other social sites, namely facebook, have not been able to do; see shares that keep going higher and higher. The Linkedin stock numbers speak for themselves, if you bought shares during the IPO, your sitting pretty right now.
We love LinkedIns upper management, especially CEO Jeff Weiner, they seem to have a knack for staying profitable and have a clear direction of where their company is going. For you technical analysts out there; theirs no chart of graph that reveals intuitive leadership.
A company with multiple revenue sources is always a plus. Linkedin makes the bulk of their coin from advertisements, but they also manage to generate revenue with paid perks and recruiting tools. All streams of revenue are flowing consistently right now, are they sustainable is the real question.
The Cons of Linkedin Stock
- Growth rates have been slowing
- Visitors dont even visit monthly
- Less than 1% of members are paid subscribers
- 27% of revenue comes from ads, mobile viewership limits ad space
- Noteworthy competition in Europe from Xing
- Lack of sex appeal (yes this matters)
Linkedin has been growing at a rapid rate; but its finally starting to slow down. We couldn’t honestly expect them to continue to grow at astronomical rates forever. Slowed growth rate is a part of any company; but none the less it still negatively affects the stock outlook.
The new metric becoming industry standard is monthly active users; facebook has 1.10 billion, linkedin has less than 200 million monthly active users. Linkedin has a high volume of “users” who don’t really “use” the site….not good for future growth.
So we talked about multiple streams of revenue and how its a good thing right? Well it is…but they may not be sustainable. Less than 1% of Linkedin members have opted to pay for premium membership. Thats okay though they still have ads….yea well sort of. Mobile is no longer the future; mobile is here, and here to stay. 27% of Linkedins revenue comes from advertisements thus far. See,the thing about mobile browsing is that theres really no room for pesky advertisements. What happens to that ad revenue when almost all users are browsing from a mobile OS?
LinkedIn is not sexy. Twitter can make you famous, facebook can let you stalk people, Linkedin lets you…update your resume. To be fair Linkedin can be a powerful tool, but it just isn’t that sexy. My dad has a power drill, its a powerful tool, but its not sexy. LinkedIn needs to sprinkle in some coolness in order to keep people engaged and actually using the site.
Buy Linkedin Stock
Even with that long list of cons I believe Linkedin Stock is a good buy. The benefits far out weigh the cons. The market is still ripe for disruption. Paper resumes will no longer be needed what so ever in the near future. Generation Y are known to switch jobs often; their Linkedin profile will allow them to jump around easier.
The companies revenues are lower recently not because they have generated cash flow, but because they are pumping it right back into the company. They still find ways to remain profitable and they will do so in the future.
Buy Linkedin Stock. Linkedin isn’t going anywhere any time soon.