LinkedIn share price dips despite strong first quarter

LinkedIn’s share price fell more than 6% despite first quarter financial results beating analysts’ estimates

LinkedIn’s share price fell more than 6% in after-hours trading despite first quarter financial results beating analysts’ estimates.

The professional networking firm reported revenue of $473.2m and earnings per share of $0.38, beating estimates of $466.57m and $0.34.

Revenue was up 46% compared with the same period a year ago, but investors took their cue from the loss of $13.4m for the first quarter, compared with a $22.6m profit a year ago.

The firm also forecast full-year revenues of between $2.06bn and $2.08bn, which is below average analysts' estimates of $2.1bn and appeared to confirm fears of a slowing rate of industry growth.

Similarly, Twitter’s share price fell 11% earlier this week after the firm reported weaker-than-expected growth in its user base, the BBC reports.

The rate of revenue growth at LinkedIn has slowed for five quarters in a row, and the firm’s share price has falling 25% since the start of 2014.

Attempting to put a positive spin on the results, LinkedIn chief executive Jeff Weiner said the quarter had been strong in terms of “member engagement” and “strategic priorities”.

He highlighted LinkedIn’s launch of its Chinese language site, aimed at tapping into the vast market in China and its shift to content marketing.

Weiner said LinkedIn had also furthered its goal to make LinkedIn the “definitive professional publishing platform” by giving members the ability to publish long-form content.

The company now claims to have more than 300 million members and said early indications regarding the publishing platform are positive, based on strong uptake and network engagement.

According to Warwick University, LinkedIn seems to be treating the mobile trend as just another channel, but this might prove problematic as members seek consistent multi-device experience. 

"Its product development strategy is to continue to diversify from its social network base with the launch of a professional publishing platform and further data analytics to drive member behavior,” said Mark Skilton, professor of practice at Warwick Business School.

"Comparing this to the successes of Facebook, Snapchat and YouTube, who have paid specific attention to a strong mobile user interface design linked to their business monetisation model, LinkedIn seems to be seeking to be a business repository of knowledge to retain its membership, but it is not clear yet how this could leverage its community groups and career development to build further potential revenue,” he said. 

However, Skilton said LinkedIn’s unique online social network with employment market services has created a high-margin business not reliant on advertising revenue.

“This means it is still a highly profitable stock option for investors long-term,” he said.

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