Morgan Stanley Says LinkedIn Is Still A 'Show-Me Story'

LinkedIn Corp LNKD reported “better than feared” Q1 results, with the revenue ahead of expectations. Morgan Stanley’s Brian Nowak maintained an Equal-weight rating on the company, with price target of $125.

Nowak mentioned that LinkedIn reported its revenue for 1Q16 two percent ahead of expectations, driven by Talent Solutions and Marketing Solutions.

Within Talent Solutions, 70 percent of the beat was due to Lynda, which contributed $55 million, significantly ahead of the estimate.

Related Link: LinkedIn Spikes On Strong Q1 Results; Here Are Its Fastest Growing Segments

Although Talent Solutions’ revenue was 1 percent ahead of expectation ex-Lynda as well, ex-FX, the revenue for this segment decelerated to 30 percent year-on-year growth.

“This 700bp sequential deceleration is the largest we have seen in the 2 years of history we have,” Nowak stated.

Despite the beat revenue, the non-GAAP EBITDA came in 1 percent below the estimate but ahead of the consensus.

Looking Forward

“Management flowed this through 1Q:16 EBITDA upside to full year 2016, raising full-year 2016 EBITDA guidance by $33mn to a range of $985mn-$1,005mn,” according to the Morgan Stanley report.

Management also pointed to incremental investment for “monetization products and quota reps.”

Nowak expects LinkedIn’s business to slow going forward. In the absence of traction with some of the company’s investment initiatives, earnings upside would be limited, the analyst pointed out.