Guidance Sinks LinkedIn Stock

For the full year LinkedIn posted EPS of $1.61 on revenues of $1.53 billion compared with EPS of $0.89 and revenues of $972.31 million in 2012. Consensus estimates called for EPS of $1.61 on revenues of $1.52 billion.

So far so good, but that’s where the goodness ended. LinkedIn provided first quarter guidance for income in the range of $455 to $460 million and adjusted EBITDA between $106 and $108 million. Fourth quarter 2013 adjusted EBITDA came in at $111.4 million. The consensus estimate for first quarter revenues was $470.27 million and the EPS estimate was $0.47. Those numbers are clearly not realistic as far as LinkedIn is concerned.

For the full year, LinkedIn forecast revenues in the range of $2.02 to $2.05 billion. Adjusted EBITDA is expected to total about $490 million. Consensus estimates call for revenues of $2.16 billion and EPS of $2.20.

The company’s CEO said:

Moving forward, we are investing significantly in a focused number of long-term initiatives that will allow us to realize our vision to create economic opportunity for every member of the global workforce.

Fourth-quarter revenues rose in all three of the company’s businesses. Talent solutions revenue rose 53%, marketing solutions revenue rose 36%, and premium subscriptions revenue rose 48%.

The CEO’s comment and another by the CFO who said the company is “investing aggressively in 2014 for both our member and customer platforms” are likely the reason that earnings estimates have been shaved. LinkedIn apparently believes that it needs to continue investing aggressively to maintain its position.

LinkedIn shares are trading down about 7.2% in after-hours trading Thursday, at $207.50. The stock’s 52-week range is $122.08 to $257.56. Thomson Reuters had a consensus analyst price target of $262.70 before today’s earnings report.