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There is a lot riding on LinkedIn's (NYSE: LNKD) first-quarter earnings report due out today (Thursday).
LinkedIn is expected to report earnings of 9 cents per share on revenue of $179 million. In the same period a year ago, the company broke even with revenue of $94 million.
The question is if the ever-growing and hugely successful professional networking service can sustain the brisk growth that has not only had job seekers and industry experts flocking to the site, but also sent its shares soaring. LinkedIn's stock has climbed nearly 70% this year.
LinkedIn did report commendable fourth-quarter numbers and enjoyed significant revenue growth across all segments. But a prior stellar quarter does not portend the same in a subsequent one.
If first-quarter results are a letdown, shares could plummet.
A Look at LinkedIn (NYSE: LNKD)
The Mountain View, CA-based company has enjoyed explosive expansion in its membership. LinkedIn ended 2011 with some 145 million members, up from 90 million at 2010's end.
LinkedIn is becoming a Facebook-type site for career-minded professionals. Helped no doubt by the high and stagnant unemployment rate, the Website drew more than 100 million monthly visitors in January for the first time, research firm comScore Inc. reported.
MarketWatch notes that as more and more employers, headhunters and job seekers congregate to the site, using it as a digital rolodex, LinkedIn benefits from the fees it charges companies, recruiting services and people who opt to pay for additional access to the members.
The market consensus is that LinkedIn is the boss in the Internet-based professional networking business. Its services have completely altered the approach to hiring by encouraging social networking between employers and job-seekers or those simply looking for contacts.
Most of its members are a high-quality bunch, a plus not just for members but also LinkedIn. As a result of its elite affiliates, more professional enterprises and professionals are apt to advertise on the site and pay additional fees to access it.
The company has impressed in the past with consistent top-line growth and the implementation of cost-control measures to improve its bottom line.
What investors should watch for today is a plan to deal with increased competition in the sector. While currently the worldwide leader in its field, LinkedIn will have to contend with behemoths like Google Inc. (Nasdaq: GOOG), Microsoft Corp. (Nasdaq: MSFT) and Facebook Inc. (Nasdaq: FB), paving the way for a major shift in the industry in the near future.
LinkedIn (NYSE: LNKD) Stock
LinkedIn shares were trading Thursday at a lofty $106, nearly 170 times projected earnings and 13 times projected revenue for 2012.
Those figures are heads above other well-established tech companies with proven track records.
As MarketWatch points out, Google has recently been changing hands at roughly 14 times this year's projected earnings and six times projected revenue. Apple Inc. (Nasdaq: AAPL), verifiably the world's most profitable company, has been trading at 13 times projected earnings and about 3.5 times its projected revenue this year.
LinkedIn's storied success has thrust its share price well above its initial public offering debut of $45 a share. This feat has eluded several other hugely hyped Internet companies such as Web game maker Zynga Inc. (Nasdaq: ZNGA), online coupon distributor Groupon Inc. (Nasdaq: GRPN) and the popular Internet music service Pandora Media Inc. (NYSE: P).
Analysts appear cautious ahead of the first quarter results. Just one of 12 analysts providing first-quarter estimates has revised upwards in the last month, according to Zacks Investment Research. There have been no downward revisions.
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Earnings Preview: LinkedIn – Analyst Blog