Another day brings some shocks for those investors who have invested in social media stocks. There was a 20% decline in the shares of LinkedIn Corp, which is the operator of the most popular social network that exists for professionals. The drop in share price wiped away about $6 billion worth of the market value of the company, after the company slashed its forecast for the full year. The slowest quarterly revenue growth had been reported by the company last week since its initial public offering four years ago. The surprisingly weak results came only days after the similar ones posted by Twitter last Tuesday.
The stock price of Twitter had also fallen by 24%, which had wiped out market value of about $6 billion. Even Facebook Inc., the biggest social network of the world, reported a slowing quarterly revenue seen in two years last week and there has been a 5% decline in its shares since the results went public. However, the earnings of the social media giant had been better than expectations and the relatively small reduction in its stock price indicated the level of investor confidence in the company, something that was not apparent in investors of LinkedIn and Twitter.
Slower revenue growth was cited by LinkedIn in its hiring business and also a delay in recognizing revenue from the online education company it had agreed to purchase the previous month, Lynda.com, for its reduction in the revenue and profit forecast and the weaker results. There was about a $200 reduction in shares of LinkedIn, which is far below the record high of $276.17 that they had managed to achieve in late February. The price targets had been cut by at least 23 brokerages on LinkedIn’s stock, ranging from about $65 to as little as $172.
Nonetheless, in comparison to Twitter, analysts were more upbeat about the prospects of the professional social network. According to some analysts, the market is placing LinkedIn in the same bucket as Twitter, but the former is completely different. They said that no doubt this was a setback, but LinkedIn is a dominant and sustainable franchise that can be woven into the fabric of regular lives with ease. Other experts also said that there has been some overreaction as far as LinkedIn is concerned. While there is less positivity, there is still some and that’s what counts.
Regardless of such statements, the price targets were still reduced by analysts on LinkedIn stock. LinkedIn was praised for its value and the way it has promoted offline recruitment to move online and the superior products it offers, but this didn’t stop the analysts from reducing their targets. However, there is one brokerage by the name of Brean Capital that rated the LinkedIn stock as ‘sell’ as opposed to others who rated in ‘buy’. The analysts at the brokerage said that FX and a large sales force were blamed for the weaker results, but it was more likely because of product fatigue as LinkedIn is struggling to promote growth.