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Op-Ed: Market savages LinkedIn, proves own analyses wrong

It’s an interesting study in market mindsets — and market mindlessness. Nothing about this rings true on any level.
The story in a nutcase shell:
LinkedIn forecast, not reported, estimated revenue of $3.6 billion or so, “well down” on the analyst’s expectations of $3.9 billion. That 300 million is about 8-9 percent. …So they knocked 40 percent off the stock price. The NASDAQ went down 3 percent.
Other revelations: Ad revenue growth is expected to be 20 percent, not 56 percent.
LinkedIn was trading at 50 time earnings, compared to Facebook around 33 percent, Twitter 29 percent.
The market price forecast has been slashed by one brokerage from $258 to $150. Really adventurous thinking here, that it’ll go back to where it was. The 52-week range is $102.81 – $276.18, and you come up with a figure of $258?
LinkedIn is believed to be “under pressure” from macro economic factors in other parts of the world according to one statement. What pressures? How do those pressures impact stock values?
It’s not a very impressive range of comments. Particularly when their previous estimates were so high. Now, all of a sudden, they know what they’re talking about? Why should anyone believe that?
OK, for starters: What the hell is growing at 20 percent in the real economy? Not a damn thing, except certain egos.
Why are you expecting ridiculous double digit growth in anything, when the global economy is dawdling along in low single digits?
Why do you expect past performance to be any guide at all in an extremely fluid market like social media? Particularly when it’s against the law in just about every country on Earth to use past performance as a valuation in any financial product?
What are company assets? Do you or do you not factor in hard assets in to a stock valuation? If not, why not? Pavlov’s dog and Schrodinger’s cat had more on the ball than this game of hide and seek with valuations.
Why are you sneering at $3.6 billion? Are you peanut vendors making that sort of revenue? The market cap of LinkedIn, according to Bloomberg, is $14.7 billion as at today. Revenue is equal to a quarter of that. How many companies have that ratio?
Listen, O Smug and Secure Infallible Ones, unto the bottom line: Projections like that are for the rubes. The price had already been going down since November, 3 months ago, prior to this excursion in to megalomania by analysts. The obvious decline is suddenly worth $11 billion, in what was apparently a backdated fit of remorse?
Who lost that $11 billion? The entire market. Stock holders, index based fund holders, major investors, add whatever here.
Ever since the global financial market decided it didn’t need the real economy, back before the subprimes, the markets have been basically spectators, second guessing themselves. Like cookie cutter management, they don’t do actual business any more. They do deals.
The LinkedIn situation is another case of a pack of spruikers selling down a stock in my not noticeably humble opinion. This looks more like deliberate market manipulation to me than any actual valuation. It’s an extremely old trick, invented by Nathan Rothschild 200 years ago. Dump stocks, then get your stooges to buy in when they’re way down. The stock miraculously returns from the dead, and what clever little gerbils we are.
It’s old, like the “thinking” which basically contradicts its own previous statements and then tries to pass off the exact opposite estimates as accurate. If your previous estimates were that far off base, what are you doing in market analysis? You should be selling used cars, or in this case, used skateboards.
At a time when the financial markets’ reputations still stink and their stock prices are down below crisis levels, you’re nitpicking about $300 million, and simultaneously saying your own previous valuations were loads of crap?
Moral of story: The markets have a lot to prove about their reliability, let alone their sanity. Since the big crash, the general consensus is that they’re full of super-refined BS. If a market analyst tells you it’s a nice day, get a sworn statement, collateral surety, and take out heavy insurance.

For the record — no, I do not own stock in LinkedIn and never have.

Postscript: For some very different views, which still don’t alter my impression that the analysts are choosing their positions very unconvincingly, see Itai Leshem’s breakdown of LinkedIn’s contributions to its own problems. Very interesting, thought provoking reading.

Written By

Editor-at-Large based in Sydney, Australia.

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