MKM Downgrades LinkedIn, Warns Jobs Growth Tailwind Could Turn Into Headwind

Online job postings, a critical parameter the fate of LinkedIn Corp LNKD, declined in Q1 for the first time in six years. MKM Partners’ Rob Sanderson downgraded the rating for the company to Neutral, while reducing the price target to $130.

Growth in online job postings has been a tailwind for LinkedIn. Analyst Rob Sanderson mentioned, however, that online postings seem to have peaked, having declined in Q1 “for the first time since the recovery began six years ago.”

He added that the company’s Talent Solutions business seems to exhibit a direct correlation with online jobs listings and indicators suggest the trend in online postings could be downward going ahead.

“It is unlikely that int'l would offset any decline in the U.S. Management has already noted cautious macro signs in EMEA and APAC last quarter and through conference presentations through Q1,” Sanderson wrote.

A TAM Issue

The addressable market for LinkedIn’s hiring solutions is “key to the bull thesis,” the analyst pointed out. He added that any weakness in this business, even if this is macro-driven, would be seen as “a TAM issue.” Thus, turning a tailwind into a headwind.

Estimate Changes

The revenue and EBITDA estimates for 2017 have been reduced from $4,461.5 million to $4,191.3 million and from $1,408.3 million to $1,223.9 million, respectively.