- TRACKER DETERIORATING: Our LNKD JOLTS tracker declined sequentially into the second month of 4Q15, which is expected given seasonality in LNKD's selling environment. But as we mentioned in our last note, we're keying in on magnitude, which has gotten worse than seasonality alone would suggest. As a reminder, our LNKD Talent Solutions TAM analysis suggests that the bulk of that TAM is in the upsell opportunity (ARPA) vs. new account volume (see note below for detail).
- GUIDANCE TO DISSAPOINT? We already had reservations about staying long into LNKD's 2016 guidance release since this mgmt team is notoriously conservative with guidance. We suspect it's even less likely now that mgmt guides to street expectations if our tracker is correctly flagging a deteriorating selling environment. Further, Fx pressure is continuing early in 2016, which we expect to be top of mind for this mgmt team since Fx was LNKD's largest source of pressure last year, and the primary source of its guidance cut.
- CLOSING LONG POSITION: Our original thesis on LNKD was that it can't be played as a sleepy long. First, we have to be mindful of ever-rising consenus estimates and a mgmt team that doesn't want to box itself into them. Second, we're late cycle, and we don't want to be there for the eventual turn. Our macro team is now calling for a potential recession as early as 2Q16, which LNKD will not be immune to since its Talent Solution TAM is tethered to macro (see note below). We still view LNKD as one of the better run companies in our space, but when we put good company up against bad macro, macro wins.
See the note below for supporting detail/analysis on our LNKD. Let us know if you would like to disucss.
LNKD: New Best Idea (Long)
07/14/15 08:00 AM EDT