LinkedIn stock down 28 per cent on weak guidance
05 Feb 2016
LinkedIn's efforts to get professionals enthused about its social network do not seem to have worked out to the expectations of investors.
The professional network yesterday announced fourth-quarter earnings and revenue that exceeded analysts' estimates, though, the company's stock fell over 28 per cent in after-hours trading on weaker-than-expected guidance.
This was the second instance in the past nine months of the Mountain View, California-based company's stock plunging on earnings news.
LinkedIn's grim prediction came as the 12-year-old social network rejigged to attract new users beyond its current 400 million. The social network helps users find jobs or just connect with others. The basic version is free, but features like advanced search and messaging strangers are charged.
To build up its user base, LinkedIn had been expanding into new markets, including China and adding new lines of business such as tools for advertising and marketing.
To help its members learn the right professional skills, LinkedIn announced in April that had had reached an agreement to buy Lynda.com, an online training site, for $1.5 billion.
LinkedIn had also been trying to improve the functionality of some of its products to increase user engagement, unveiling a dramatic revamp of its mobile app, which had been often criticised for being cluttered and difficult to navigate.
LinkedIn said its revenue would come in at around $820 million in the first quarter, and $3.6 billion to $3.65 billion for 2016, in a statement yesterday. According to data compiled by Bloomberg, these figures were below analysts' average estimate for $867.1 million and $3.9 billion.
LinkedIn's user base stood at 414 million in the fourth quarter, up from 396 million in the prior period.
''In this market, there's no mercy for a miss,'' said James Cakmak, an analyst at Monness Crespi Hardt & Co, Bloomberg reported. ''While the fourth-quarter results were solid, the outlook fell short as global macro and elevated investments pose headwinds for 2016.''
LinkedIn is faced with a slowdown in its marketing-services business, which companies use to find potential customers, show them ads and relevant information and generate sales leads. Sales to recruiters, using LinkedIn for finding candidates to fit jobs, were also slowing.
