LinkedIn Stock Hammered on Lowered Expectations

Recruitment revenue q1 2015LinkedIn got hammered today after it scaled back its financial outlook and reported the slowest quarterly growth since it went public in 2011.

Despite another record setting revenue quarter, investors dumped shares in after-hours trading, sending the stock down by as much as 25 percent or more than $50 a share. LinkedIn closed at $252.13.

It was after the New York markets closed that LinkedIn announced it earned 57 cents a share, a penny more than Wall Street’s  consensus forecast. (Including stock-based compensation and other items typically excluded by analysts, LinkedIn lost 34 cents a share.)

Revenue for the first quarter came in at $637.9 million, also better than expected.

By percentage increase, revenue grew at the slowest rate in four years, 35 percent over the same quarter last year. Likewise, each of its segments — talent, marketing, and premium subscriptions — saw similar slower growth.

Other metrics, less influenced by the law of large numbers, also showed smaller increases. One important measure, the percentage of “mobile unique visiting members,” was 38 percent, almost half the growth of Q1 last year. Mobile users now account for half of all unique member visits.

However, the primary driver behind the stock price drop was the sharp difference between what analysts are expecting in revenue this quarter and what LinkedIn said it expected to bring in.

The company’s Q2 forecast estimated revenue between $670 million and $675 million. Analysts were expecting $717.5 million.

A second hit came from scaling back the initial full-year estimate, which officials previously predicted would fall between $2.93 billion and $2.95 billion. Today, the company forecast revenue to be about $2.9 billion. That’s $80 million less than analysts’ estimates.

During an investor conference call today, company officials cited several reasons for scaling back expectations, including a large sales team transition that shuffled clients to new sales reps. That lead to higher than usual churn among customers and lower upsells. A $50 million foreign exchange hit is expected due to the strong U.S. dollar. And slowing display ad sales is also taking a small toll.

LinkedIn has a history of making conservative revenue predictions, then handily beating them when the numbers come in. Scaling back an earlier estimate was a first.

In reporting on the results, financial site The Motley Fool, said, “Investors should keep a close eye on growth in the Talent Solutions business, which offers tools for recruiters and as such is LinkedIn’s principal earnings driver, accounting for 62 percent of revenue. Decelerating growth in this segment could spell trouble in the quarters to come.”

Article Continues Below

Careers site publisher DHI Group (formerly Dice Holdings), yesterday reported it earned 9 cents a share on revenues for the quarter of $63.8 million. Per share earnings were in line with Wall Street’s expectations, but revenues came in somewhat below analysts’ forecast.

The stock price took a sharp dive Wednesday, after the company forecast revenues in Q2 would come in between $64 million and $65.5 million, below the $67.2 Wall Street estimate. The stock closed Tuesday at $8.87, then plunged as low as $7.50 following the financial report Wednesday. It closed Thursday at $7.60.

Monster, the other publicly held careers publisher, reports its first quarter results May 7th.

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

Topics