Wedbush's Pachter Neutral On LinkedIn But 'Cautiously Optimistic Q3 Kicked Off a Trend'

• Shares of LinkedIn Corp LNKD has appreciated 16.29 percent over the past month, reaching a high of $217 on October 29.
• Wedbush’s Michael Pachter has maintained a Neutral rating on the company, while raising the price target from $200 to $232.
• The company reported its Q3 results ahead of expectations, driven by robust cost control and the performance of its Talent Solutions business. The Q4 guidance was largely in-line with the consensus.

Analyst Michael Pachter mentioned that the topline significantly beat expectations, while LinkedIn achieved robust cost control, which lead to the EBITDA and EPS meaningfully exceeding the estimates.

The biggest revenue upside versus expectations came from the Talent Solutions segment, which reported revenue of $502 million, significantly ahead of the estimate. The Hiring and Learning & Development businesses also posted better than expected results.

“Marketing Solutions revenue was $140 million, flat sequentially, as CPM-based display ads offset growth for Sponsored Updates,” Pachter stated, while mentioning that the core business “continues to grow as the company offers an increasing array of products to recruiters and job seekers.”

Pachter believes that LinkedIn’s core business has a “long runway ahead of it.” Customers for Worldwide Corporate Solutions totaled a little under 40,000 by the end of Q3, which Pachter said was only “a very small percentage of the millions of businesses in the U.S. alone.”

Deep targeting and Sponsored Updates are expected to drive significant ad growth for Marketing Solutions, going forward.

For Q4, the Wedbush report said that although the revenue guidance appeared conservative, “higher than expected EPS guidance reflects a newfound desire to control expenses and deliver higher profits.”