LNKD | Thoughts into the Print (4Q15)

Takeaway: We closed the long, now mulling the short. Expecting light 2016 guide, but street reaction tough to gauge. Debating whether to pull trigger


  1. CLOSED LONG, MULLING SHORT: Our Talent Solution TAM analysis suggests that the majority of LNKD’s opportunity is in the up-sell opportunity (vs. account volume).  We believe that opportunity is largely driven by the selling environment, which is largely driven by macro; specifically where we are in the employment cycle.  Our Macro team has been flagging that we are late cycle, and recently suggested that we may be heading into a recession as early as 2Q16.  With that backdrop, we closed the long once we saw our tracker deteriorate more than seasonality alone would have suggested.   Now, the question is whether that deceleration is a blip, or the beginning of a bigger trend.  If the latter, our TS Economic Sensitivity analysis suggests the up-sell will get much tougher from here (see first table and note below for detail).
  2. EXPECT LIGHT 2016 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.  Consensus may have been asking for too much to begin with.  The implicit assumption in consensus Talent Solution revenues estimates is calling for an acceleration in ARPA, which would be a challenge even if the selling environment wasn’t deteriorating as our tracker suggests.  Futher, consensus is assuming accelerating growth in LNKD's other two segments, meaning any upside from both Sales Navigator and the dissipating Display headwind appear to be captured in estimates.  Further, Fx remains a headwind YTD, which we expect to be top of mind for this mgmt team since FX was the largest source of its guidance cut last year.    
  3. BUT CAN’T QUITE GAUGE REACTION: We doubt we’re alone in our expectation for soft guidance since LNKD’s mgmt team is notoriously conservative with its guidance to begin with.  The setup right now isn’t all that dissimilar to the 2015 guidance release, which was inline with consensus revenue and slightly lower on EBITDA, with 1Q15 missing across the board.  However, LNKD crushed 4Q14 estimates, and the stock ripped.  We believe mgmt gave itself enough breathing room on the 4Q15 guide, so it’s possible that the stock could pop on this print as well.  Then again this isn't 2015, and LNKD’s recent outperformance suggests expectations are rising into the print.  We're debating whether to pull the trigger on the short before LNKD reports on Thursday.

LNKD | Thoughts into the Print (4Q15) - LNKD   ARPA vs. Tracker 4Q15 2

LNKD | Thoughts into the Print (4Q15) - LNKD   TS TAM Analysis

LNKD | Thoughts into the Print (4Q15) - LNKD   TS Scen 2016

LNKD | Thoughts into the Print (4Q15) - LNKD   Consensus estimates 4Q15


LNKD: New Best Idea (Long)
07/14/15 08:00 AM EDT
[click here]


As a reminder, we will be hosting our quarterly Internet Best Ideas call this Thursday at 1pm EST.  In the interim, let us know if you have any questions, or would like to discuss further.


Hesham Shaaban, CFA


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more