Cantor Reiterates Buy On LinkedIn, Issues 'Clearing Up'

In a report published Friday, Cantor Fitzgerald analyst Youssef Squali reiterated a Buy rating and $254 price target on

. With the stock trading more than 20 percent below its high, LinkedIn offers an attractive risk/reward profile. The company's new social selling platform, Sales Navigator, was launched with the aim of enhancing the sales process with the potential to achieve five-fold higher engagement as compared to cold calling. According to the Cantor Fitzgerald report, "It focuses on the top of the sales funnel by leveraging a team's aggregate connections (up to 3 degrees) and LinkedIn's accurate self-updating profile information to hone in on the most targeted/relevant leads. Individual subscriptions start at $80/mo, while team subscriptions start at $330/mo." Almost 30 percent of the Premium Subscription revenue for 1Q15 was contributed by Sales Navigator. On the other hand, the company has revised its revenue expectations for FY15 from Lynda.com. "Deferred revenue was written down as a result of purchase accounting rules. If LinkedIn does not incur cost of revenue (performance obligation) for the deferred revenue balances acquired, the company does not get to recognize the deferred revenue," Squali explained, adding, "This is an accounting adjustment with no impact to pre-tax cash flows, and one we view as a non-issue." The analyst believes that the disappointing FY15 guidance, following the Q1 results, was primarily driven by a "re-segmentation" of the sales force earlier in the year. Although this transition led to a higher than anticipated impact on churn and upsell opportunities, the analyst expects the worst to be over and for the segment to get back on track in the next couple of quarters.