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The LinkedIn stock price soared more than 15% after hours Thursday after the company beat earnings estimates. With shares down 43.69% year to date, investors are asking us if this is a good time to buy LinkedIn stock.
Before we get into our LinkedIn stock recommendation, here's exactly why the LinkedIn stock price soared following earnings...
Wall Street was expecting LinkedIn Corp. (NYSE: LKND) to report a 30% year-over-year (YOY) increase in quarterly revenue and 5% YOY earnings growth. Instead, the company reported 35% revenue growth and a 30% increase in adjusted earnings YOY.
After Thursday's close, LinkedIn reported earnings per share (EPS) of $0.74 on $861 million in revenue. That beat the EPS of $0.60 on $828 million in revenue analysts were expecting.
LinkedIn booked Q1 revenue of $558 million from "Talent Solutions," $154 million from "Marketing Solutions," and $149 million from "Premium Subscriptions." Wall Street was looking for those figures to come in at $539.8 million, $142.3 million, and $142.4 million, respectively.
LinkedIn also beat estimates on member count. The company reported 433 million members at the end of the quarter, besting forecasts of 427.9 million.
Despite all the bullish numbers, the LinkedIn stock price rally did not last. LinkedIn stock quickly gave back the bulk of Thursday's after-hours gains. In mid-morning trading Friday, the LinkedIn stock price was up just 1.71% at $124.60.
The earnings numbers were welcome news to investors who watched the LinkedIn stock price crater 40% after Q4 2015 results. While the company beat earnings in Q4 2015, it also provided cautious guidance for Q1 2016.
Looking ahead to Q2, LinkedIn expects revenue between $885 million and $890 million. Analysts on average expect revenue to be about $885.7 million. The company said adjusted earnings for the current quarter are expected to range between $0.74 and $0.77. The consensus estimate was for $0.71.
How to Play the Volatile LinkedIn Stock Price in 2016
Growth in online job postings has been a tailwind for LinkedIn, but that appears to have peaked.
Online postings declined in Q1 for the first time since the job recovery began six years ago. With the unemployment rate at 5%, sitting at a level the U.S. Federal Reserve deems full employment, traffic and visits at LinkedIn, the go-to site for professional job seekers, has slowed.
Also slowing is the global economy, which will weigh on LinkedIn's corporate customer base.
Faced with lower growth and waning traffic, it will be challenging for the LinkedIn stock price to see meaningful upside.
Analysts at Thomson First Call expect LNKD earnings growth to lag behind competitors in Q2 as well. They call for earnings growth of 9% for LNKD, while the industry is looking at growth of 17.5%.
While the LinkedIn stock price has already been dramatically cut, we're sitting on the sidelines. There are too many other places to find growth and gains.
Find Money Morning experts' best stocks to buy for long-term gains here.