SAN FRANCISCO (AP) ? LinkedIn Corp.’s third-quarter earnings will reveal whether the online professional networking service is still building on the momentum generated by an initial public offering of stock that created a national buzz about up-and-coming Internet companies. The numbers are due out after the stock market closes Thursday.
WHAT TO WATCH FOR: Robust growth in revenue and registered members will be crucial to support LinkedIn’s stock, which is still trading at about twice the $45 price that the company fetched in its May IPO. Wall Street’s steady support so far has kept LinkedIn’s valuation hovering around $9 billion ? 18 times this year’s projected annual revenue of $490 million. By comparison, Google’s recent market value of $194 billion translates into 6.6 times its projected net revenue of $29.3 billion.
Summer is traditionally a slow time for LinkedIn because so many people are on vacation and aren’t thinking about work or their careers as much. But the July-September period could be different because of lingering afterglow from its sizzling IPO and a town hall meeting on jobs that LinkedIn hosted for President Barack Obama late last month.
When LinkedIn announced its second-quarter earnings in early August, CEO Jeff Weiner said the company was adding two new members per second, or about 173,000 per day. Assuming LinkedIn maintained that pace throughout the quarter, LinkedIn’s membership would have climbed from about 116 million at the end of June to about 132 million at the end of September.
LinkedIn doesn’t charge people to post their resumes, but attracting more members is important because a bigger audience makes the service more compelling to employment recruiters and advertisers.
The company, which is based in Mountain View, gets more than two-thirds of its revenue 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.
WHY IT MATTERS: It’s especially important for LinkedIn to deliver a strong quarter because trading restrictions on about 94 million shares of its stock are about to be lifted. Employees and other insiders are prohibited from selling during the initial 180 days after the IPO. The shackles come off Nov. 21.
As the expiration of the lock-up period approaches, investors may get nervous about a massive wave of selling triggering a sharp drop in LinkedIn’s stock price. An outstanding third quarter would likely encourage more investors to hold on to their shares on the hope that LinkedIn is still in the early stages of rapid growth that could last for years.
LinkedIn’s performance could also affect the stock market’s appetite for other Internet IPOs, such as the one that online coupon distributor Groupon is expected to price late Thursday.
WHAT’S EXPECTED: Analysts polled by FactSet expect a LinkedIn to break even on a per share basis. Revenue is expected to total $128 million.
LAST YEAR’S QUARTER: LinkedIn earned $915,000, or 2 cents per share, on revenue of nearly $61.8 million.