BGC Partners: LinkedIn's Problem Boils Down To Quarterly Outsized Reactions
LinkedIn Corp (NYSE: LNKD) reported mixed quarterly numbers on Thursday, but the weak guidance provided by the company resulted in its stock taking a major hit in after-hours trading. GAAP diluted EPS loss for the quarter widened to $0.34 from the $0.11 it posted for the same quarter last year.
Colin Gillis, senior technology analyst and director of research at BGC Financial, was on CNBC following LinkedIn's results to weigh in on its earnings.
"I think the key thing here is they are acquiring a company that has a very different margin profile than their core business," Gillis said. "So, the Lynda.com acquisition – that’s a business that runs around a 5 to 10 percent margin compared to the 25 percent typical EBITDA that LinkedIn does. So, you are layering on a lot of cost."
He continued, "It's going to likely be a good long-term acquisition, but there's a near-term impact and it's interesting because you always say, 'Well, won't the Street have figured it in that this is going to happen when it hits?' And sometimes it does, and sometimes it doesn't.
"The problem with LinkedIn is every time it prints a quarter, you get these outsized reactions."
Nothing Wrong With The Business
Gillis went on, "Out of the last eight quarters, we have had moves of over 10 percent up and down, four times. The smallest move is 6 percent; there's nothing wrong with this business, right?
"It tends to be a better stock in the back half of the year. That's why we downgraded it in January coming into the Q1 earnings," Gillis concluded.
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