LinkedIn (LNKD) reported fourth-quarter results that, to a large extent, are a non-event as it relates to the firm’s valuation. The company is reflecting substantial revenue and earnings growth long into the future, and while its current trajectory remains strong, it will only hold its lofty price if it can continue to deliver on such expectations quarter after quarter. We maintain the firm will not be able to deliver on the long-term expectations that are embedded in its stock price, but it may take some time for the market to realize our view.
Revenue for its fourth-quarter roughly doubled from the same period a year ago, while net income came in at just under $7 million ($0.06 per share) during the period. By comparison, LinkedIn’s market capitalization is nearly $8.3 billion, a huge disparity. Revenue from hiring solutions advanced 136% during the period, while sales from marketing solutions and premium subscriptions increased 77% and 87%, respectively. Non-GAAP net income was $13.3 million ($0.12 per share), compared to $5.2 million in the fourth quarter of last year. Adjusted EBITDA in the fourth quarter was $34.4 million (21% of revenue) and compares to $16.3 million (20% of revenue) during the fourth quarter of the year-ago period.
Looking ahead, the firm provided its outlook for the first quarter and full-year of 2012. We reiterate, however, that such a forecast, even for 2012, makes little difference to the firm’s valuation. The market is pricing in significant long-term revenue and earnings expansion (through 2020), and as long as LinkedIn continues to show progress on this front on a quarterly basis, it may hold its lofty price. However, it shouldn’t justify such an irrational valuation, in our opinion. The company expects revenue in the first quarter of 2012 to be between $170 million and $175 million and EBITDA for the period to come in between $25 million to $27 million. On a full-year 2012 basis, the company thinks revenue will hit $860 million on the high end of its guidance range and report EBITDA as high as $165 million (the firm has a forward EV/EBITDA multiple of over 40 times!). Even though we think the firm will be able to hit its guidance ranges for revenue and EBITDA, we firmly believe the company remains overvalued at present levels and encourage investors to steer clear of the firm’s shares.