SAN FRANCISCO (AP) — LinkedIn Corp.’s shares soared nearly 17 percent Friday, the biggest one-day gain since the online professional networking service’s stock market debut last May.
THE SPARK: The company’s fourth-quarter earnings, released late Thursday, made it clearer that LinkedIn’s website has become an important hiring tool. And it stands to make even more money than it has been if employers continue to add jobs at the rate they have been in recent months.
LinkedIn, which is based in Mountain View, thrived during the fourth quarter as its revenue more than doubled from the previous year, to nearly $168 million. The company also earned $6.9 million, better than analysts anticipated.
Just as important, Linked added another 14 million resumes on its service to increase its membership to 145 million at the end of December. In the first few weeks of this year, the total has climbed above 150 million.
Although LinkedIn doesn’t charge people to list their career milestones, attracting more members is one of the keys to its financial success. That’s because its professional networking service becomes more valuable to prospective employers as the pool of talent on the website swells.
LinkedIn makes most of its money from the hiring services and other special privileges that it sells to headhunters and companies looking to fill positions. The company also sells advertising, but its most robust growth is happening in its hiring solutions division.
That’s an indicator that LinkedIn should rake in more revenue if the U.S. economy continues to create more jobs. Analysts say LinkedIn has barely tapped the job-recruitment potential in international markets, presenting another growth opportunity.
LinkedIn expects its revenue to climb by as much as 65 percent this year to $860 million.
THE BIG PICTURE: LinkedIn’s biggest worry might be applications such as BranchOut and Talent.me that highlight people’s professional connections within their social networks on Facebook, which has 845 million users worldwide. So far, though, most people seem to prefer to have separate profiles on LinkedIn and Facebook. For its part, Facebook Inc. has shown little interest in challenging LinkedIn’s professional networking niche.
LinkedIn’s stock also could face pressure beginning Feb. 27 when trading restrictions on about 55 million shares are lifted.
The trading ban had been imposed on company insiders as part of LinkedIn’s initial public offering of stock. If those insiders decide to sell large blocks of stock, the shares could tumble. All but 7 million of the unlocked shares are owned by LinkedIn Executive Chairman Reid Hoffman and two venture capital firms, Sequoia Capital and Greylock Financial, which were early investors in the company.
THE ANALYSIS: Wedge Partners analyst Martin Pyykkonen said he is convinced LinkedIn has staying power. The professional networking service has become “much more efficient than traditional and more manual ways of finding talent.”
J.P. Morgan analyst Doug Anmuth said like what he saw in the fourth quarter so much that he raised his target price on LinkedIn’s stock to $90 from $84.
SHARE ACTION: LinkedIn’s stock rose $12.86 to $89.25 in Friday’s afternoon trading. It’s the largest one-day gain since the stock soared on its first day of trading nearly nine months ago. After pricing at $45 in the IPO, LinkedIn’s stock more than doubled to close at $94.25.