LinkedIn's (LNKD) valuation is head-scratchingly high. After a positive earnings call a few weeks ago, the stock rose sharply until it was knocking on the door of $100. As of Wednesday morning, it was trading around $90.
It's very hard to get comfortable with buying into the stock at these levels. I understand that people are bullish because they see the company as having built a difficult-to-replicate platform that organizations in search of talent will be able to leverage for years to come.
LinkedIn's specialty is that it attracts not only job-seekers but also the already successful people who have jobs. After all, those are probably the people any prospective employer wants to know about, so it can get its story in front of the people who are already successful and satisfied in their current jobs.
Yet, even understanding the value of the platform and how difficult it is for another player -- such as Monster Worldwide (MWW) -- to replicate, it's hard to feel that this is a great entry-point for the stock.
Still, I was impressed by the recent earnings call by CEO Jeff Weiner and CFO Steve Sordello. Those earnings calls were so different from the calls of recent IPOs such as Groupon (GRPN) and Zynga (ZNGA).
Any new social media CEO should listen to Weiner and Sordello for a good primer of how to conduct themselves on the calls. They were very open, sharing a wealth of metrics on the performance of LinkedIn. This gave investors comfort.
Memo to Mark Zuckerberg: You definitely should listen to these calls before the Facebook (FB) IPO.
LinkedIn is a hot social media IPO stock with a lasting business. That's different from a Zynga, which I see as merely a gaming company that believes it is somehow worth more because it has connections to Facebook, and that's supposedly going to help it grow faster than other gaming companies.
In reality, I believe that investors are likely to reassess Zynga by the end of the next six months. When they do, they should see it as a single-digit multiple of earnings, rather than something sky-high. Zynga's flat quarter-on-quarter sales growth is also alarming for its bulls.
LinkedIn, by contrast, does seem to be the real deal. Ironicially, it might turn out to have more staying power than Facebook, due to the value of its niche job-seeker focus.
Lastly, as a guy who is still long Yahoo! (YHOO), it's a little frustrating to see Jeff Weiner do so well away from Yahoo!
Weiner certainly was perceived of as a star at Yahoo! during his tenure. However, he came into the company with Terry Semel. That hurt his tech street cred at first, although he made people forget that over time. He was also associated with the Sue Decker class of management at Yahoo! When the winds of change blew at Yahoo!, Weiner decided to leave. He's made a very good choice for himself. It would be interesting to see what he could do with Yahoo! today, compared with Scott Thompson. In the past three years, Weiner has certainly brought some good product chops to LinkedIn -- something that's been missing at Yahoo!
As much as I like Yahoo!, if I were Weiner, I would find it hard to leave such a good spot as he's in now at LinkedIn. The company has a great runway ahead of itself.
The stock would be very interesting if and when it drops below its IPO price in the mid-$40s.