Remember Lynda.com? Here's How It Affects LinkedIn Shareholders Going Forward

In a report published Monday, Morgan Stanley analyst Brian Nowak maintained an Overweight rating on LinkedIn Corp (NYSE: LNKD), while reducing the price target from $300 to $280, with lynda.com expected to add around 550bp to the company's revenue growth in 2016.Analyst Brian Nowak expects lynda.com's top-line to grow by 20 percent in 2015 and 18 percent in 2016. "This doesn't seem a stretch given it has grown at a 30% CAGR the past 3 years and should benefit from cross-selling into LNKD's Talent Solutions enterprise customer base, where (at most) only 3% of current customers are paying lynda.com customers," Nowak said. Although purchase accounting would LinkedIn's benefit from lynda.com's growth in 2015, the latter could add about 550bp to LinkedIn's revenue growth next year.Lynda.com could generate healthy EBITDA margins of 32 percent in 2016, boosted by "high incremental margin revenue dollars from cross-selling with the Talent Solutions sales force, scale and leverage of LinkedIn's tech & content and G&A costs, and cost-saves from the $25mn severance/restructuring charge in '15," Nowak added. This implies that lynda.com's EBITDA would surge from -$68mn in 2015 to +$67mn in 2016. "Despite our assumed increased investment spending, we still see 12% upside to Street '16 EBITDA," the report said.The price target has been reduced to reflect increased investment. However, Nowak considers the recent sell off as a buying opportunity.