With shares of LinkedIn (NASDAQ:LNKD) trading around $170, is LNKD an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
LinkedIn is a professional network on the Internet with more than 90 million members in over 200 countries and territories. Through the company's platform, members are able to create, manage and share their professional identity online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities. Its platform also provides members with solutions, including applications and tools, to search, connect and communicate with business contacts, learn about career opportunities, join industry groups, research organizations and share information. Networking and social contact is increasing in importance for consumers and companies all around the world. A leader in the social and networking space, LinkedIn, is poised to increase its user base and profits in the coming years.
T = Technicals on the Stock Chart are Strong
LinkedIn stock has seen a powerful uptrend in its stock price extending back to its initial public offering in 2011. The stock is now consolidating near all-time high prices and may get going after gains are digested. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, LinkedIn is trading around its rising key averages which signal neutral to bullish price action in the near-term.
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(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of LinkedIn options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| LinkedIn Options | 39.52% | 53% | 51% |
What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Flat | Average |
| July Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on LinkedIn’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for LinkedIn look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 400% | 604% | -50% | 300% |
| Revenue Growth (Y-O-Y) | 72.29% | 117.68% | 108.22% | 142.96% |
| Earnings Reaction | -12.93% | 21.26% | -0.06% | 16.04% |
LinkedIn has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about LinkedIn’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has LinkedIn stock done relative to its peers, Facebook (NASDAQ:FB), Monster Worldwide (NYSE:MWW), Google (NASDAQ:GOOG), and sector?
| | | Monster Worldwide | | Sector | |
| Year-to-Date Return | 47.57% | -7.51% | -3.20% | 23.06% | 14.89% |
LinkedIn has been a relative performance leader, year-to-date.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!Conclusion
LinkedIn provides valuable social and networking interaction tools and services to consumers, companies, and groups all around the world. The stock has seen a powerful run over the last few years that has taken it to all-time high prices. Over the last four quarters, earnings and revenue figures have been on the rise which have produced mixed feelings among investors who may be expecting a little more. Relative to its peers and sector, LinkedIn has been a year-to-date performance leader. Look for LinkedIn to OUTPERFORM.
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