Credit Suisse Slashes Target On LinkedIn From $230 To $176, Says 'Patience Is Required'

LinkedIn Corp LNKD shares appear to have lost favor with investors and are currently trading close to their 24-month lows.

Credit Suisse’s Stephen Ju maintained an Outperform rating on the company, while lowering the price target from $230 to $176 based on a more conservative stance on the company’s margin expansion potential.

Factors Affecting The Stock

Ju mentioned that currently there were four problems that were impacting the stock. Firstly, transactional and translational FX headwinds were impacting online self-service sign-ups for Talent Solutions.

Related Link: Investors No Longer Giving LinkedIn The Benefit Of The Doubt?

Secondly, Ju pointed out that the SMB Talent Solutions offerings were “overly complex” for SMBs.

The analyst also noted that “underlying cross currents for Marketing Solutions (Bizo closure, Premium Display deterioration, offset by Sponsored Updates)” were leading to an “unfavorable mix shift away from Online to Field Sales.”

Margin Expansion

Ju stated that the unfavorable mix shift was adversely affecting LinkedIn’s margin expansion, while explaining that mix was important for a company that was growing its revenues in the 20 percent range, since it would need to demonstrate operating leverage.

“We conclude that while LinkedIn may be hard-pressed to demonstrate that leverage in the near term given the negative mix shift, the aforementioned headwinds should begin to unwind starting in 1Q17/2Q17,” Ju added.