SAN FRANCISCO (AP) — In its first quarterly update since its sizzling IPO, online professional networking service LinkedIn Corp. reassured investors who believe it’s smart to buy into the hype surrounding a promising crop of Internet companies.
The second-quarter results announced Thursday injected some hope into a grim stock market and could feed the mounting excitement for upcoming initial public offering of stocks from other rising Internet stars such as online coupon Groupon Inc. and Web game maker Zynga Inc.
The reason: LinkedIn reported the accelerating revenue and membership growth that it needed to support its lofty stock price and delivered higher earnings when analysts were bracing for a loss.
It marked the first update since LinkedIn’s initial public offering of stock in May. The company’s shares immediately doubled from their IPO price of $45 and remained in that range, stirring debate about whether investors are overvaluing Internet companies that build large audiences with mostly free services.
The fervor has raised fears that the Internet may be in the early stages of an investment bubble akin to the late 1990s hysteria that culminated in a devastating collapse.
LinkedIn’s performance served as a reminder that there is at least one significant difference in the latest Internet frenzy: some of today’s online companies are making money, unlike the ones hatched in the Web’s early days.
LinkedIn earned $4.5 million, or 4 cents per share, in the April-June period. That contrasted with earnings of $938,000, or 2 cents per share, at the same time last year.
Revenue more than doubled from last year to $121 million while membership climbed 61 percent to 116 million at the end of June.
Analysts, on average, had projected a loss of 4 cents per share on revenue of $104.5 million, according to FactSet.
LinkedIn shares rose $4.44, or nearly 4.7 percent, to $99.96 in extended trading to recover part of a steep decline that occurred during the regular trading session amid a broad market sell-off
The earnings in LinkedIn’s most recent quarter represented the most money the company has made in any three-period so far in its 8-year history.
Losses could loom ahead, though. LinkedIn has indicated it’s willing to sacrifice short-term earnings to increase spending on technology and new product development.
Growth is also expected to slow, partly because of economic uncertainty and partly because the company thinks it got a temporary lift in recent months from all the publicity surrounding its IPO. LinkedIn expects its third-quarter revenue to range from $121 million to $125 million, which would be slightly below the second-quarter growth rate of 120 percent. For the full year, LinkedIn sees its revenue rising to as high as $485 million, roughly doubling from $243 million in 2010.
The potential losses may not bother investors too much, as long as LinkedIn is persuading millions more people to post their resumes and other information about their careers on its website. As its audience grows, LinkedIn’s website will become a more attractive place for advertisers to promote their wares and for employers to recruit talent.
LinkedIn gets more than two-thirds of revenues from fees that it charges companies, corporate recruiting services and other people who want broader access to the profiles and other data on the company’s website. The remainder comes from advertising.