LinkedIn: Growth and Fundamentals Trump Valuation

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David Evanson and Michael Graham, Winter, 2011

Following his initiation on LinkedIn (LNKD) with a BUY rating and $85 price target, Canaccord Genuity Internet tech analyst Michael Graham said “Earnings per share growth will be strong in 2012 and accelerate in 2013.”

“We believe LinkedIn is the default network for professionals, and believe most users desire to keep professional profiles separate from their personal ones, creating barriers to competition.”

He added, “LinkedIn has considerable operating momentum; we expect continued strong growth domestically and even faster growth internationally, where we believe the business is just entering an acceleration phase in penetration rates. . . While 2012 is expected to see high marketing spend, we believe 2013 should begin to show operating leverage, and we expect earnings growth to accelerate.”