Cramer Loves this Stock – Should You?
Value investors have waited for this to happen for a while.
This tech company hasn’t garnered the media attention of Facebook (NASDAQ: FB) but on Friday, CNBC’s Jim Cramer came out singing its praises. Just because Cramer likes it doesn’t mean you should, but this stock may have given value investors exactly what they wanted—an entry point.
That company is LinkedIn (NASDAQ: LNKD). Even after Friday’s double digit fall, the stock is up 53 percent this year and has quadrupled since its 2011 IPO.
Then came Thursday after the bell. LinkedIn announced earnings that were well above consensus estimates but spooked investors with its Q2 guidance. Looking to Q2, the company projected revenue of $342 to $347 million versus consensus of $359.24 million. This sent the stock down 13 percent on Friday to close at $175.59.
Slow Mobile Adaptation
Does this story sound familiar? Social media is all about mobile and companies slow to embrace it find themselves wondering what went wrong. It happened with Facebook and now, LinkedIn. According to Aaron Kessler, analyst at Raymond James & Associates Inc. and reported by Bloomberg, “It could be the desktop-to-mobile shift, and they don’t have as much advertising on mobile.”
But Cramer thinks the 13 percent drop was an overreaction. He said, "They are under-promising and they will over-deliver. I want to buy LinkedIn." Cramer said that the Q2 guidance and its EBITDA estimates were the only two negatives in an otherwise bullish report.
“"This is the only negative. Page after page after page, its premium model is terrific. I refuse to be tied down by that line," Cramer said. "I like LinkedIn."
What Does the Chart Say?
Can a stock drop 13 percent in one day with very little technical damage? Yes it can, and LinkedIn is proof. Although it broke through what some technicians might call a weak level of support around $190, the drop took it down to within one dollar of its 50 day moving average. The fact that this level held is a victory for a stock trading at 502 times earnings. Not only did the 50 day hold, so did the uptrend.
The next couple of trading days will be pivotal for the stock. If the 50 day fails on volume, the thesis could change but if it holds these levels, LinkedIn could be the value investor’s dream stock.
Of course, don’t take our word for it. Analyze the earnings report, listen to the conference call, and look at the chart but definitely keep an eye on this name.
Disclosure: At the time of this writing, Tim Parker had no position in the securities mentioned but may in the next couple of trading days.
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