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LNKD Surges (LNKD, QQQ, FB) 2.8.2013

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 The options were expecting about a $9.00 move in the stock and according to current prices, the move is going to be outside of that. The ‘at the money’ straddle was just about $9.50 too.  Today’s move was basically unlikely, according to what the options were implying yesterday.  LNKD is probably going to open up at a new all time high. Bullish fundamentals are paired with bullish management.

Analysts are moving around their PTs. BMO Capital Markets maintained LNKD at market perform, but raised its $130 PT. JEF held on to its buy rating and increased its PT to $170.

Salerno.mark.a@gmail.com

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LinkedIn Networks With Amazon (LNKD, AMZN)? 1.28.2013

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AMZN is the premier international online retailer. The company serves consumers through its retail websites and focuses on selection, price, and convenience. LNKD, on the other hand, is the most popular professional networking website. LNKD offers a variety of professional services for career advanement. Both companies embrace technology in order to drive growth.

LNKD and AMZN both spend a lot of their cash on reinvestment. For example, just under 60% of LNKD revenue was spent on sales/marketing and product development. This kind of investment positions the two firms to benefit in the long run.

The LNKD situation is, interestingly enough, very similar to AMZN. AMZN spends a large portion of its cash on improving its distribution centers and preparing itself to have economies of scale for the future. These two stocks have rich PE multiples and both trade in a similar fashion. This thesis can be tested. The 55-day (a Fibonacci number) price correlation between the two stocks is 0.88. This coefficient is very strong. A reading of 1.00 represents a perfect positive correlation and readings above 0.75 are generally considered strong. This figure simply quantifies the severity of relationship (positive or negative). Therefore AMZN will be a stock to watch for LNKD investors.

Spending for the long-run seems fine, however renowned economist John Maynard Keynes one said, “We are all dead in the long run.” They may be planning for the long run, but if these two companies continue to put up underwhelming EPS the market may eventually discount their massive forward and trailing PE multiple.

salerno.mark.a@gmail.com

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What's a Better Buy: Facebook or LinkedIn 12.4.12

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 Fundamentals: Facebook has over a billion users compared to Linkedin’s 100 million users, but Linkedin is a site used by professionals so they have far different user experience expectations.  

Facebook takes in most of its revenue from advertising specifically using the sidebar like its advertising competitor google. More recently they have expanded to put some ads in the newsfeed but the problem they occur is if they put too many ads in the news feed their customer base becomes unhappy with the experience and less people are likely to click.

Linkedin does do some sidebar advertising but has expanded its revenue stream by selling premium memberships to customers and charging companies to recruit future employees on their site.

Because Facebook does not charge users a dime for using the site that does open the door for all sorts of potential.  Even finding a way to get $5-10 per user would do a lot to facebook’s top and bottom lines. Linkedin’s growth might be capped at becoming the premier site for job hiring.

 

Now lets take a quick look at valuations:

With this is mind one would have to say FB is the better buy because you are getting a much PE ratio for a sales growth percentage that is still very respectable.

Technicals: Both Facebook and Linkedin are coming up in overbought territory on the RSI indicator.  FB has show buyers will come in heavy in the $18.50-$20 range.  It should encounter some resistance in the $29 range.  However you are about to get the 50 day SMA crossing above the 100 day positively which could be viewed as a buy signal to some. In my opinion I feel that FB could be bought on dips after the RSI gets worked off into neutral territory.

Linkedin has recently crossed back above the the 200 day moving average and is consolidating here as it is overbought on most indicators.  This is a great sign if you bought the stock on that cross over because you get the feeling it is just waiting to take off back above both the 50 and 100 day moving averages.  LNKD could be bought on a breakout of above average volume of that 50 day with an upside target of first $112 and then then $122-124 range.

 



Conclusion: Since technically they both could be seen as buys in the the short to intermediate term, I will use the fundamental story of FB to break the tie and be a buyer of the dips in Facebook.

 

Disclaimer: Currently I am not long FB or LNKD

 

Bio: Zachary Teller has a degree in Finance from the University of Connecticut. Zachary has 8 years of equity trading experience.  His trading approach is largely technical but refers to fundamentals regularly to get a gauge on the markets as a whole. Feedback is always appreciated.

 

Email: zachary.teller1@gmail.com

Twitter: @zachteller16