LinkedIn loses $6 billion market value

Bengaluru: Another day, another shock for investors in social media stocks.

Shares of LinkedIn Corp, operator of the most popular social network for professionals, fell 20 per cent in early trading on Friday, wiping out more than $6 billion of market value, after the company slashed its full-year forecast.

LinkedIn reported on Thursday its slowest quarterly revenue growth since it went public four years ago.

The surprisingly weak results followed Twitter Inc's on Tuesday. Twitter's stock fell by as much as 24 per cent, slicing about $6 billion off its market value.

Even Facebook Inc posted its slowest growth in quarterly revenue in two years last Wednesday, and its shares have fallen about five per cent since.

Facebook's earnings were better than expected, though, and the comparatively small drop in its stock price indicated a level of investor confidence not shown to Twitter and LinkedIn.

LinkedIn cited slower revenue growth in its hiring business and a delay in recognizing revenue from lynda.com - the online education company it agreed to buy last month - for its weaker results and cut in profit and revenue forecast.

LinkedIn's shares fell to about $200 in early trading, far below their record high of $276.17 reached in late February.

At least 23 brokerages cut their price targets on the stock, by as much as $65 to as low as $172.

Still, in contrast to Twitter, most analysts were upbeat about LinkedIn's prospects.

"The market is putting LinkedIn in the Twitter bucket," analysts at Stifel Nicolaus wrote. "We think the market is wrong. LinkedIn is not Twitter.

"Yes, this is a reset but we believe LinkedIn is a sustainable and dominant franchise that is becoming woven into the fabric of our daily professional lives."

Stifel, which has a "buy" on LinkedIn, cut its price target to $250 from $300.

RBC Capital Markets analyst Mark Mahaney also said the market had overreacted. "While we are incrementally less positive, we're not 20 per cent less positive," Mahaney said.

RBC kept its "outperform" rating, but cut its price target to $275 from $300.

Pacific Crest analysts kept their "overweight" rating while cutting their price target to $250 from $295.

"We like LinkedIn on its strong fundamentals, the shift from traditional offline recruiting to online, and its superior products versus its competition," they said in a note.

Of 41 analysts covering the stock, 31 rate it "buy" or higher while nine have a "hold", according to Thomson Reuters data.

Only one brokerage, Brean Capital, rates the stock "sell".

"Weaker results were blamed on a large sales force re-org and FX, but we think the company is scrambling to buy growth and the re-org is due to product fatigue," Brean analysts wrote.