3 Reasons LinkedIn Is A Buy (And 3 Catalysts That Could Be Coming)

Courtesy of Benzinga.

In a report published Friday, Credit Suisse analyst Stephen Ju maintained an Outperform rating on LinkedIn Corp (NYSE: LNKD), while raising the price target from $307 to $311. The company reported its 2Q15 results, with 33 percent year-on-year revenue growth, well ahead of the guidance, estimates and consensus.

3 Reasons

According to the Credit Suisse report, there are three primary reasons that the stock is an attractive buying option. Firstly, "LinkedIn's current roster of over 37,000 corporate solutions clients implies a minority penetration rate for Talent Solutions on a global base of ~745k addressable businesses that have more than 100 employees."

Secondly, the analyst believes that since the current subscription model undercharges enterprise customers, LinkedIn might be able to potentially increase pricing on a per-lead basis, which could prove more lucrative.

Thirdly, "over the longer term LinkedIn can leverage its unique data set to place the right ad in front of the right user at the right time, driving ad inventory pricing higher."

Related Link: LinkedIn Has A 'Whopper Of An EPS'

On the other hand, Ju also believes that there could be further upside potential to the stock in the near to medium term if the company is able to achieve faster-than-anticipated ramp of Sales Navigator and rolls out additional products that could help LinkedIn monetize its "unique" data assets.

Upside could also be fuelled by acceleration in the Marketing Solutions business, driven by recovery in customer engagement, as well as contribution from Bizo. According to Ju, upside could also be driven by continued increase in pricing in the Talent Solutions business, "as the company exerts market power as the current all-you-can-eat subscription model undercharges enterprise customers."

Results

With regard to the 2Q15 results, CEO Jeff Weiner said, "LinkedIn continued to deliver increased member and customer value in the second quarter while delivering solid financial results."

The company reported GAAP diluted EPS of $(0.53) and non-GAAP diluted EPS of $0.55. The adjusted EBITDA for the quarter stood at $163 million. In addition, LinkedIn saw a 60 percent year-on-year increase in feed engagement, with "search traffic growing meaningfully faster than overall member activity."

LinkedIn also announced its 3Q15 guidance, with the revenue and adjusted EBITDA marginally higher than the consensus, while raising the FY15 revenue and adjusted EBITDA guidance.

Posted-In: Credit Suisse Stephen JuAnalyst Color Price Target Analyst Ratings Best of Benzinga