This Analyst Just Downgraded LinkedIn, Recommends Shareholders To Sell Into Strength

Randle Reece of Avondale Partners recommended LinkedIn Corp (NYSE: LNKD) shareholders should take the money and run after the company agreed to sell itself to Microsoft Corporation (NASDAQ: MSFT) for $196 per share.

Reece pointed out that shares of LinkedIn were trading within 2 percent of the buyout offer, but the transaction isn't expected to close until late this year. The analyst added that LinkedIn agreed to sell itself to Microsoft because it got an offer that was "too good" to pass on there's unlikely to be a competing offer to push the takeout price higher.

Reece downgraded LinkedIn to Market Underperform and the price target was raised from $140 to $196.

Related Link: Good For LinkedIn, 'Terrible' For Microsoft

Reece continued that Microsoft's acquisition of LinkedIn is subject to the usual regulatory approval process during which LinkedIn is likely to report two fiscal quarters worth of results. If the company were to report a significantly worse than anticipated earnings print, there's the risk of the deal falling through and LinkedIn's stock could fall "well below" the transaction price.

On the other hand, if LinkedIn reports significantly better-than-expected results, it's "conceivable" a competing bidder may present a superior takeout offer prior to the close of the deal with Microsoft.

Nevertheless, Reece stated he doesn't expect the $196 buyout offer to change and LinkedIn's stock is now "unattractive" given the spread between the current stock price and the takeover price. As such, the analyst recommends "LinkedIn holders sell into strength following the deal announcement."