LinkedIn Forecast Disappoints, Prompts Price Target Cuts

[May 03, 2014]  (Reuters) - LinkedIn Corp's full-year revenue forecast fell short of market expectations, prompting at least 14 brokerages to cut their price targets on the stock.

The company's shares were down more than 5 percent at $152.65 in late morning trading on the New York Stock Exchange on Friday.

Investors expect social media companies, which command lofty valuations, to post high growth rates and even a slight miss prompts a backlash from Wall Street analysts and investors.

"We believe that Street expectations were running too high, and that (LinkedIn) is trying to level set those expectations," CRT Capital analysts wrote in a note, cutting their price target to on the stock to $225 from $235.

Shares of LinkedIn, which connects professionals with prospective employers, trade at 84.6 times forward earnings. Twitter Inc trades at 333 times, according to Thomson Reuters StarMine.

Facebook Inc's shares trade at a much lower multiple of 39.
 

Twitter said in April its user growth slowed in the first quarter, sparking concerns about the microblogging service's prospects of matching Facebook's 1.2 billion users.

LinkedIn raised its sales forecast for 2014 to $2.06 billion-$2.08 billion — below the average analyst estimate of $2.11 billion.

"The quarter ended up largely being a non-event for us," BMO Capital Markets analysts wrote in a note, cutting their target on the stock by $20 to $250 to "reflect multiple compression across the Internet group."

LinkedIn is likely to add about 6,800 customers this year compared with the 8,000 it added last year, Susquehanna analyst Brian Nowak wrote in a note, cutting his price target by nearly 30 percent to $280.

Pacific Crest Securities analyst Evan Wilson said the lack of discussion on new opportunities was disappointing, cutting his price target on the stock to $220 from $275.

The company launched a Chinese language "beta" version of its main website in February.

UBS analyst Eric Sheridan, however, upgraded the stock to "buy" from "neutral", saying the company had a sustainable first-mover advantage with growth opportunities in the small and medium business segment and in China.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Joyjeet Das and Saumyadeb Chakrabarty)

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