LinkedIn
US$180.64 - BUY
Financials
Year to 31 December 12A 13A 14CL 15CL 16CL
Revenue (US$m) 972 1,529 2,186 2,977 3,901
...
Shifting into higher gear LinkedIn - BUY
1 August 2014 james.lee@clsa.com 2
Talent Solutions update
Talent Solutions reven...
Shifting into higher gear LinkedIn - BUY
1 August 2014 james.lee@clsa.com 3
q New standalone app announced. LinkedIn’s mul...
Shifting into higher gear LinkedIn - BUY
1 August 2014 james.lee@clsa.com 4
q New product launches. The company recently a...
Shifting into higher gear LinkedIn - BUY
1 August 2014 james.lee@clsa.com 5
China update
Management did not provide much u...
Shifting into higher gear LinkedIn - BUY
1 August 2014 james.lee@clsa.com 6
Figure 3
Global Media comp sheet
*in HK$. GOOG...
Shifting into higher gear LinkedIn - BUY
1 August 2014 james.lee@clsa.com 7
Summary financials
Year to 31 December 2012A 2...
Important disclosures LinkedIn - BUY
1 August 2014 james.lee@clsa.com 8
Research subscriptions
To change your report distr...
Important disclosures LinkedIn - BUY
1 August 2014 james.lee@clsa.com 9
The policy of CLSA (which for the purpose of this ...
Important disclosures LinkedIn - BUY
1 August 2014 james.lee@clsa.com 10
redistributed without the written consent of CLSA...
Important disclosures LinkedIn - BUY
1 August 2014 james.lee@clsa.com 11
Philippines Inc (a member of Philippine Stock Exc...
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LinkedIn: Shifting into higher gear

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LinkedIn reported $534m in revenue, $145m in Ebitda and $0.51 in non-GAAP EPS, all above consensus estimates. The company addressed two key investor concerns into the quarter. First, Talent Solutions beat expectations and
revenue growth stabilized, on strong net customer adds and accelerated Arpu growth. Second, Marketing Solutions revenue growth also accelerated ahead of our anticipation as pricing improved meaningfully due to Sponsored Updates. As a result, management raised guidance ahead of consensus in 3Q and 2014. We think that fundamentals will get even stronger in 2H14 as the ad business kicks into high gear, especially in 4Q. Lastly, China provides a very attractive optionality for LNKD, in our view. We are raising our estimates and target price to $275 (from $265).

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LinkedIn: Shifting into higher gear

  1. 1. LinkedIn US$180.64 - BUY Financials Year to 31 December 12A 13A 14CL 15CL 16CL Revenue (US$m) 972 1,529 2,186 2,977 3,901 Rev forecast change (%) - - 3.7 5.5 7.3 Ebitda (US$m) 223 376 554 780 1,117 Ebitda fcast chg (%) - - 6.8 4.0 3.8 Adjusted EPS (US$) 0.89 1.61 1.88 2.93 4.69 CL/consensus (35) (EPS%) - - 107 107 110 Adj EPS growth (% YoY) 153.3 81.6 16.7 56.0 59.9 Adjusted PE (x) 203.5 112.0 96.0 61.6 38.5 ROE (%) 2.8 1.5 (2.5) (0.2) 5.4 Source: CLSA Find CLSA research on Bloomberg, Thomson Reuters, CapIQ and themarkets.com - and profit from our evalu@tor proprietary database at clsa.com Produced by CLSA Americas LLC. For important disclosures please refer to page 8. James Lee james.lee@clsa.com +1 617 295 0120 Wei Fang +1 617 295 0128 1 August 2014 USA Media Reuters LNKD.N Bloomberg LNKD US Priced on 31 July 2014 S&P 500 @ 1,930.7 12M hi/lo US$256.14/142.33 12M price target US$275.00 ±% potential +52% Shares in issue 113.6m Free float (est.) 75.0% Market cap US$22,804m 3M average daily volume US$381.3m (US$381.3m) Major shareholders Jennison Associates LLC 8.7% T Rowe Price Associates 7.3% Stock performance (%) 1M 3M 12M Absolute 5.3 17.7 (11.4) Relative 7.0 14.9 (22.6) Abs (US$) 0.0 17.7 (11.4) 0 50 100 150 200 250 300 350 400 450 500 44 97 150 203 256 309 May-11 May-12 May-13 May-14 LinkedIn (LHS) Rel to 500 (RHS ) (US$) (% ) Source: Bloomberg www.clsa.com Changeintargetprice Shifting into higher gear LinkedIn reported $534m in revenue, $145m in Ebitda and $0.51 in non-GAAP EPS, all above consensus estimates. The company addressed two key investor concerns into the quarter. First, Talent Solutions beat expectations and revenue growth stabilized, on strong net customer adds and accelerated Arpu growth. Second, Marketing Solutions revenue growth also accelerated ahead of our anticipation as pricing improved meaningfully due to Sponsored Updates. As a result, management raised guidance ahead of consensus in 3Q and 2014. We think that fundamentals will get even stronger in 2H14 as the ad business kicks into high gear, especially in 4Q. Lastly, China provides a very attractive optionality for LNKD, in our view. We are raising our estimates and target price to $275 (from $265). Positive trends in Talent Solutions Customer adds were exceptionally strong at 2,200 vs 1,400 last quarter as the company expanded new markets to capture the small and medium-sized business (SMB) segment. At the same time, Arpu growth accelerated to 12% YoY from 7% last quarter as more customers are taking more licensed seats and value-added services. Marketing Solutions shifting into high gear Surprisingly, Marketing Solutions revenue growth accelerated to 44% YoY vs 33% in 1Q14. The game changer was pricing, reversing the prior-quarter trend at 18% YoY vs -7% in 1Q14. All key ingredients are in place, including a strong leadership team from Google, an efficient ad-buying system through auctions, a scalable distribution channel through API partners, and an effective analytics platform through the acquisition of Bizo. With that in mind, the company is kicking into high gear heading into the peak advertising season in 2H14. As LNKD closes the gap between mobile traffic at 45% and revenue at 20%, ad revenue should continue to accelerate. Long-form content + job listings to improve engagement We feel the key bear debate is the deceleration in engagement to 22% YoY growth in page views from 43% YoY in 1Q14. We believe two factors should increase engagement going forward: (1) a new search engine for job listings from the acquisition of Bright. The algorithm craws the internet for relevant jobs and has already increased the number of job listings by 3x in the month of July; (2) a new aggregation platform for long-form professional content from the acquisition on Newsle that curates professional blogs relevant to LNKD users. Estimates changes and valuation We are increasing our estimates for 2014 to 2016. For 2016, our new estimates are $3.9bn in revenue, $1.12bn in Ebitda and $4.69 in non-GAAP EPS. Our estimates imply revenue per user for advertising at $6 vs $14 for Facebook. We think it’s very conservative because B2B customers are typically more valuable than B2C due to their higher purchasing power.
  2. 2. Shifting into higher gear LinkedIn - BUY 1 August 2014 james.lee@clsa.com 2 Talent Solutions update Talent Solutions revenue came in at $322m, including a portion of $18m recruiting media revenue reclassified from Marketing Solutions. Excluding the impact from the change, the organic Talent Solutions revenue YoY growth rate would be 48%, compared to 50% last quarter. During the quarter, both the LinkedIn Corporate Solution (LCS) customer add and the pricing were showing strong momentum. Talent Solutions accounted for 60% of total revenue in 2Q14, down from 62% in 1Q14. Figure 1 shows the growth rate on reclassified results since 1Q12. Figure 1 LinkedIn Talent Solutions revenue by quarter Source: Company, CLSA q Net LCS customer adds in the quarter were strong at 2.2k compared to 1.4k in 1Q, bringing the total average customer count to 26.9k. Management explained that the account consolidation was still going on in the quarter, implying even bigger new customer signups. We believe the expansion to SMB markets contributed to the strong customer add. q On the pricing side, we saw the average selling price per customer (ASP) in LCS accelerated to 12% YoY growth from 7% last year, as highlighted in Figure 1. Management attributed the strength mainly to cross-selling towards existing customers, who have increased spend on buying more seats and more value-add services. That said, the company expects to continue to focus on deepening the relationships with existing customers, backed by growing headcount for this segment. Field sales contributed 75% of Talent Solutions revenues, same as last quarter. q Expanded job listings. With the help of the Bright acquisition, the company managed to raise the number of job listings by 3x in the USA, making the global total from the prior 300k level to more than 1m by indexing job openings outside of the social platform. As a result, users will see a lot more job positions when they search on LinkedIn. As a reminder, the incrementally indexed job postings are not paid by recruiters, therefore they don’t directly contribute to revenue growth. With increased scale, we believe the platform is likely to attract more job seekers and improve engagement, which will ultimately improve monetization. q Redesigned user profile. The company announced new profile design earlier this week, which added recent activities (eg, updates and long-form posts) onto the profile. This change allows LinkedIn members to better present themselves to their network and potential recruiters. We believe the change should boost engagement. q Redesigned search architecture. LinkedIn rolled out new search feature called Galene in June, allowing users to search beyond their second-degree connections and also delivering results twice faster. According to management, page views of content driven by search have since accelerated nicely. (US$m) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 LCS customers – average 9,820 11,228 12,919 15,097 17,274 19,197 21,129 23,223 25,144 26,962 ASP per customer (US$) 8,142 8,443 8,254 8,196 8,099 8,022 8,213 8,330 8,698 8,965 Talent Solutions LCS revenue 80.0 94.8 106.6 123.7 139.9 154.0 173.5 193.4 218.7 241.7 Talent Solutions SMB revenue 26.7 30.4 37.5 45.8 54.4 62.9 64.2 68.0 72.9 80.6 Talent Solutions revenue 102.6 121.6 138.4 161.0 184.0 205.0 237.7 261.4 291.6 322.3 LCS customers YoY growth (%) 127 107 92 82 76 71 64 54 46 40 ASP per customer YoY growth (%) -1 1 1 4 -1 -5 -1 2 7 12 Talent Solutions revenue YoY growth (%) 121 107 95 90 80 69 65 54 50 49
  3. 3. Shifting into higher gear LinkedIn - BUY 1 August 2014 james.lee@clsa.com 3 q New standalone app announced. LinkedIn’s multi-app strategy continued as the company announced its new app Connected in early July, which offers users a different way to interact with their connections on LinkedIn. The design is similar to FB’s Paper app, delivering updates in the form of “cards” that is optimized for smaller screens. Early data shows that active users are using it more than four days a week. q Looking by geography, international markets continued to outgrow the USA, up 63% YoY (versus 63% last quarter) compared to the USA at 41% (versus 43% last quarter). As a result, international’s revenue contribution increased to 39% from 38% last quarter. Marketing Solutions update Marketing Solutions revenue came in at $107m, excluding a portion of $18m recruiting media revenue reclassified to Talent Solutions. Normalizing the impact, the organic Talent Solutions revenue YoY growth rate would be 45% compared to 36% last quarter, a significant acceleration. Pricing was the major driver during the quarter due to Sponsored Updates. Marketing Solutions accounted for 20% of total revenue this quarter, up from 18% in 1Q14. Figure 2 shows the growth rate on reclassified results since 1Q12. Figure 2 LinkedIn Marketing Solutions revenue by quarter Source: Company, CLSA q LinkedIn attracted 16.9m new members during the quarter, compared to 19.7m last quarter. We believe mobile is a major driver, which accounted for 45% of total traffic from 43% last quarter. The company’s global expansion also helped drive new members. q Based on the new internal data provided by the company, unique visitors as a percentage of average members was down 9% YoY vs positive growth in past few quarters. As guided, page views per unique visitor growth decelerated in the quarter, to 0.4% YoY from 4.1% last quarter. Net net, page views growth decelerated to 22% YoY compared to 43% last quarter. To counter that effect, we believe the new search engine for job listings and the new content aggregation platform for long-form professional content will reaccelerate engagement, measured by PV growth. q On the pricing side, however, we see an inflection at 18% YoY growth compared to YoY declines in past several quarters. Management attributed the strength to both Sponsored Updates, as well as right-hand rail display ads. q Sponsored Updates maintained momentum. According to management, revenue contribution from Sponsored Updates as a percentage of Marketing Solutions continued to climb, reaching 28% this quarter from 23% last quarter and just 7% in 3Q13 when firstly announced. 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Members (m) - Average 152.8 167.3 180.7 194.7 210.1 228.2 248.7 268.0 286.7 305.0 UV as % of memebers (%) 39.0 37.4 35.9 37.7 40.6 43.9 43.0 39.7 40.9 39.9 UVs (m) 59.6 62.5 64.8 73.4 85.3 100.1 106.8 106.3 117.3 121.7 PVs per UV 186.2 198.4 196.0 201.6 212.2 207.8 206.0 207.9 220.8 208.7 Page Views (bn) 11.1 12.4 12.7 14.8 18.1 20.8 22.0 22.1 25.9 25.4 ASP 4.0 4.7 4.6 5.0 3.6 3.5 3.4 4.4 3.3 4.2 Marketing Solutions revenue 44.0 58.3 58.3 74.6 64.8 73.8 75.5 97.8 86.0 106.5 Page Views YoY growth (%) 63 68 73 49 43 22 ASP YoY growth (%) -10 -25 -25 -12 -7 18 Marketing Solutions revenue YoY growth (%) 47 27 30 31 33 44
  4. 4. Shifting into higher gear LinkedIn - BUY 1 August 2014 james.lee@clsa.com 4 q New product launches. The company recently announced new ad tools called Sponsored Direct Content, which enables advertisers to publish ads to newsfeed without posting them to their company page. These ads will appear in the homepage, or newsfeed of LinkedIn users who fit the targeting profile, similar to unpublished page posts (or dark posts) that FB has. Advertisers gain the ability to customize and test their content across audience segments. In the prior version, the advertiser has to repeatedly post its ads to the company page to gauge users’ interest. Now, marketers can test and optimize the performance of its ads selectively within LinkedIn’s audience base. As a result, we should see less spamming and higher relevancy. In addition, the optimization cycle should be shorter so spending can reach scale faster. q Acquisition of Newsle. LinkedIn acquired the company in mid-July aiming to expand its capacity in content aggregation. Newsle is a San Francisco- based tech startup that leverages natural language processing and machine learning algorithm to find articles that talk about you or people you care, and send a notification to you close to real time. Currently Newsle is still running separately but LinkedIn has already started to integrate the functionality into its core properties, including the new Sales Navigator launched yesterday. We believe this will help the company deliver more relevant long-form content to its users to increase engagement. q Sponsored API network gaining traction. According to management, ad spend through API network partners accounted for 10% of Sponsored updates revenue during the quarter. We believe the number could grow to 25% over time. q Looking by geography, international market growth accelerated 800bps to 45% YoY, compared to the USA which accelerated 1400bps to 44%. As a result, revenue contribution from international markets increased to 44% from 43% last quarter. Premium Subscriptions update Revenue for the subscriptions segment grew 44% YoY to $105m versus our estimate of $102m, driven by strong sales navigator growth. The company has seen a stable churn for general subscriptions and a nice uptick in new subscriber Arpu. The segment accounted for 20% of total revenue in 2Q14, same as last quarter. q LinkedIn has also announced a new Sales Navigator product for enterprise with enhanced features and insights, which brings instant pricing lift and moves from self-serve to filed sales. According to management, the new Sales Navigator is priced at $1,200 per seat per year as compared to the average of $700 for premium subscription products, translating to an instant 70% pricing lift. The customer set is pretty broad and early adopters are from financial and technology industries. On the distribution side, the company is now focusing on field sales to drive the adoption and currently about one third of revenues is from direct sales. Management expects this product to be more field-driven as the business scales, similar to Talent Solutions. In addition, the company also plans to sell Sales Navigator on a self-serve basis to small business and individual sales professionals.
  5. 5. Shifting into higher gear LinkedIn - BUY 1 August 2014 james.lee@clsa.com 5 China update Management did not provide much updates during the call, other than citing China has become the fastest market in terms of new member growth and the engagement growth was also healthy. A leading competitor in China called 51job.com gets $4 revenue per user for recruiting, a proxy for LNLKD longer- term. Margin and capex update Opex trended down this quarter to 73% of revenue versus 75% last quarter. That said, operating margin expanded 290bps QoQ to 18%. Capex was $96m this quarter (18% of revenue) compared to $89m (19% of revenue) last quarter. For whole-year 2014, we are tuning up our capex estimate by 3% to nearly $400m. Estimate changes Given the lifted full-year outlook, we are tuning up our forecasts. For 2014, we raise revenue estimate by 4% to $2.2bn, lift Ebitda by 9% to $564m and raise non-GAAP EPS by 15% to $1.88. For 2015, our new estimates are $3.0bn/$804m/$2.93 from prior $2.8bn/$751m/$2.62. For 2016, our new estimates are $3.9bn/$1.2bn/$4.69 from $3.6bn/$1.1bn/$4.24. Valuation details Our new price target of $275 is based on 28x our new 2016 Ebitda forecast of $1.2bn. Our 2016 estimates imply revenue per unique visitor on advertising at $6 vs $14 for FB. We think it’s very conservative because B2B customers are typically more valuable than B2C due to their higher purchasing power. Investment risks Competition: LinkedIn faces significant competition in all aspects of its business. For Talent Solutions, the company faces competition from established online recruitment companies including Monster and CareerBuilder, which are adding social features onto their platforms. For Marketing Solutions, the company is competing with big companies like Google and Facebook. User engagement: As more internet users move from PC to mobile, determining how to maintain the engagement among members is key to success. LinkedIn needs to focus on product innovations and user- interface optimization for mobile users. Failure to do so may negatively impact its operations. Balance between members and customers: LinkedIn needs to keep a balance between members and customers. Members want engaging content and better social activities while customers want more powerful tools to interact with members (InMail or ads). Too many inaccurate interactions will negatively impact user experience.
  6. 6. Shifting into higher gear LinkedIn - BUY 1 August 2014 james.lee@clsa.com 6 Figure 3 Global Media comp sheet *in HK$. GOOG, FB, YHOO, AOL, AMZN, EBAY, LNKD, ZNGA are our estimates, others consensus. Priced on 31 July 2014. Source: FirstCall, CLSA Segment Company GOOG FB AOL AMZN EBAY LNKD TWTR EXPE PCLN TRIP ZNGA BIDU SINA CTRP Tencent* YNDX MAIL.ru MELI Price 579.55 72.65 38.55 312.99 52.83 180.64 45.19 79.42 1,242.45 94.84 2.92 216.05 48.39 64.03 128.60 30.28 33.87 92.50 Shares (F/D) 686.4 2,615.0 84.1 468.0 1,267.0 125.3 550.2 104.9 53.2 146.3 850.0 349.8 66.9 142.9 9,331.0 335.7 208.3 44.2 Market Cap 397,782 189,980 3,242 146,479 66,936 22,634 24,864 8,331 66,098 13,875 2,482 75,574 3,236 9,150 1,199,967 10,166 7,055 4,084 Net Debt (55,963) (13,956) (124) (5,519) (2,048) (2,367) (250) (1,021) (4,314) (56) (1,137) (4,809) (714) (595) (46,773) (384) (118) (198) Enterprise Value 341,819 176,024 3,119 140,960 64,888 20,267 24,613 7,310 61,784 13,819 1,345 70,765 2,522 8,555 1,153,194 9,782 6,937 3,886 Net Cash per Share 81.54 5.34 1.47 11.79 1.62 18.89 0.45 9.73 81.09 0.38 1.34 13.75 10.68 4.16 5.01 1.14 0.57 4.47 Estimates Revenue 14CL 53,532 12,051 2,457 91,119 18,263 2,187 1,271 5,644 8,470 1,239 710 7,804 771 1,168 98,904 1,475 959 477 Revenue 15CL 65,195 16,515 2,593 108,834 21,164 2,977 2,065 6,356 10,189 1,549 722 10,798 959 1,526 120,239 1,792 1,145 558 Revenue 16CL 77,589 21,164 2,712 128,062 24,989 3,902 3,142 7,091 12,235 1,903 735 14,164 1,182 1,974 147,415 2,157 1,347 577 Grow th '13-'15 23% 45% 1% 21% 15% 40% 76% 15% 22% 28% -9% 45% 22% 31% 27% 27% 15% 9% Grow th '13-'16 21% 39% 2% 20% 16% 37% 68% 14% 22% 26% -6% 41% 22% 30% 25% 25% 16% 7% EBITDA 14CL 26,541 7,721 462 6,287 5,832 564 208 1,015 3,376 494 86 2,314 66 125 38,840 597 504 158 EBITDA 15CL 32,840 10,053 474 7,807 6,646 804 473 1,163 4,161 637 150 3,294 164 234 48,921 744 605 180 EBITDA 16CL 40,087 12,823 481 9,351 7,672 1,151 892 1,312 5,155 806 242 4,413 260 376 60,688 809 714 216 Grow th '13-'15 24% 44% -1% 22% 11% 46% 151% 15% 25% 30% 79% 28% 51% 16% 39% 27% 13% 2% Grow th '13-'16 23% 39% 0% 21% 12% 45% 128% 14% 24% 29% 73% 30% 53% 30% 34% 20% 15% 8% Non-Gaap EPS 14CL 26.52 1.52 1.81 4.05 2.95 1.88 0.04 3.84 52.23 2.19 0.02 5.35 0.82 0.72 3.17 1.28 1.78 2.38 Non-Gaap EPS 15CL 32.77 1.75 1.98 6.05 3.40 2.93 0.26 4.48 63.82 2.84 0.06 7.35 1.81 1.27 4.00 1.57 2.13 2.93 Non-Gaap EPS 16CL 39.45 2.19 1.97 8.20 4.00 4.69 0.66 5.26 77.71 3.61 0.10 9.83 3.22 2.03 4.98 1.99 2.51 3.72 Grow th '13-'15 20% 42% -2% 19% 12% 35% nm 18% 24% 30% nm 24% 27% 7% 39% 18% 15% 5% Grow th '13-'16 20% 36% -2% 24% 14% 43% nm 18% 23% 29% -236% 27% 42% 23% 34% 21% 16% 12% EBITDA Margin 2014CL 50% 64% 19% 7% 32% 26% 16% 18% 40% 40% 12% 30% 9% 11% 39% 40% 53% 33% 2015CL 50% 61% 18% 7% 31% 27% 23% 18% 41% 41% 21% 31% 17% 15% 41% 42% 53% 32% 2016CL 52% 61% 18% 7% 31% 29% 28% 19% 42% 42% 33% 31% 22% 19% 41% 38% 53% 37% Valuation EV/Sales 2014 6.4 14.6 1.3 1.5 3.6 9.3 19.4 1.3 7.3 11.2 1.9 9.1 3.3 7.3 11.7 6.6 7.2 8.1 EV/Sales 2015 5.2 10.7 1.2 1.3 3.1 6.8 11.9 1.2 6.1 8.9 1.9 6.6 2.6 5.6 9.6 5.5 6.1 7.0 EV/Sales 2016 4.4 8.3 1.1 1.1 2.6 5.2 7.8 1.0 5.0 7.3 1.8 5.0 2.1 4.3 7.8 4.5 5.2 6.7 EV/EBITDA 2014 12.9 22.8 6.8 22.4 11.1 35.9 118.5 7.2 18.3 28.0 15.6 30.6 38.0 68.4 29.7 16.4 13.8 24.6 EV/EBITDA 2015 10.4 17.5 6.6 18.1 9.8 25.2 52.0 6.3 14.8 21.7 9.0 21.5 15.4 36.6 23.6 13.2 11.5 21.6 EV/EBITDA 2016 8.5 13.7 6.5 15.1 8.5 17.6 27.6 5.6 12.0 17.1 5.6 16.0 9.7 22.8 19.0 12.1 9.7 18.0 P/E2014 21.9 47.8 21.3 77.3 17.9 96.1 nm 20.7 23.8 43.3 146.0 40.4 59.1 88.9 40.6 23.7 19.0 38.9 P/E2015 17.7 41.5 19.5 51.7 15.5 61.7 173.8 17.7 19.5 33.4 48.7 29.4 26.7 50.4 32.2 19.3 15.9 31.6 P/E2016 14.7 33.2 19.6 38.2 13.2 38.5 68.5 15.1 16.0 26.3 29.2 22.0 15.0 31.5 25.8 15.2 13.5 24.9 Cash-adj.P/E 2014 18.8 44.3 20.5 74.4 17.4 86.0 nm 18.1 22.2 43.1 79.1 37.8 46.0 83.1 39.0 22.8 18.7 37.1 Cash-adj.P/E 2015 15.2 38.5 18.7 49.8 15.1 55.2 172.1 15.6 18.2 33.3 26.4 27.5 20.8 47.1 30.9 18.6 15.6 30.0 Cash-adj.P/E 2016 12.6 30.7 18.8 36.7 12.8 34.5 67.8 13.2 14.9 26.2 15.8 20.6 11.7 29.5 24.8 14.6 13.3 23.7 Emerging MarketsGlobal
  7. 7. Shifting into higher gear LinkedIn - BUY 1 August 2014 james.lee@clsa.com 7 Summary financials Year to 31 December 2012A 2013A 2014CL 2015CL 2016CL Summary P&L forecast (US$m) Revenue 972 1,529 2,186 2,977 3,901 Op Ebitda 223 376 564 804 1,151 Op Ebit 74 93 60 194 451 Interest income 0 0 0 0 0 Interest expense - - - - - Other items 0 1 2 0 0 Profit before tax 74 95 62 194 451 Taxation (53) (68) (128) (201) (283) Minorities/pref divs/affils - - - - - Net income 21 27 (66) (7) 168 Summary cashflow forecast (US$m) Net income 21 27 (66) (7) 168 Operating adjustments - - - - - Depreciation/amortisation 80 111 180 246 322 Working capital changes 114 120 140 150 176 Non-operating adjustments 51 155 262 307 357 Net operating cashflow 267 413 517 696 1,023 Capital expenditure (125) (278) (398) (476) (546) Free cashflow 141 135 119 220 477 Acq/inv/disposals (308) (1,080) - - - Net investing cashflow (433) (1,358) (398) (476) (546) Increase in loans - - - - - Dividends 0 0 0 0 0 Net equity raised/other 97 1,454 - - - Net financing cashflow 97 1,454 0 0 0 Incr/(decr) in net cash (69) 510 119 220 477 Exch rate movements 1 24 0 0 0 Opening cash 339 271 780 899 1,119 Closing cash 270 804 899 1,119 1,596 Summary balance sheet forecast (US$m) Cash & equivalents 270 803 899 1,119 1,596 Debtors 204 302 437 595 780 Inventories - - - - - Other current assets 545 1,650 1,603 1,532 1,439 Fixed assets 187 362 594 845 1,096 Intangible assets 148 194 139 135 132 Other term assets 29 42 40 45 45 Total assets 1,382 3,353 3,713 4,272 5,088 Short-term debt - - - - - Creditors 54 67 87 119 156 Other current liabs 362 575 853 1,161 1,522 Long-term debt/CBs - - - - - Provisions/other LT liabs 59 79 52 60 69 Minorities/other equity 0 0 0 0 0 Shareholder funds 908 2,631 2,721 2,932 3,342 Total liabs & equity 1,382 3,352 3,713 4,272 5,088 Ratio analysis Revenue growth (% YoY) 86.2 57.3 43.0 36.2 31.0 Ebitda growth (% YoY) 98.0 32.6 17.6 83.1 75.8 Ebitda margin (%) 15.8 13.4 11.0 14.8 19.8 Net income margin (%) 2.2 1.8 (3.0) (0.2) 4.3 Dividend payout (%) 0.0 0.0 - - 0.0 Effective tax rate (%) 71.2 71.5 206.3 103.6 62.7 Ebitda/net int exp (x) - - - - - Net debt/equity (%) (29.8) (30.5) (33.1) (38.2) (47.8) ROE (%) 2.8 1.5 (2.5) (0.2) 5.4 ROIC (%) 4.3 2.0 (3.4) (0.4) 9.1 EVA®/IC (%) (7.4) (9.6) (14.6) (12.0) (2.6) Source: CLSA
  8. 8. Important disclosures LinkedIn - BUY 1 August 2014 james.lee@clsa.com 8 Research subscriptions To change your report distribution requirements, please contact your CLSA sales representative or email us at cib@clsa.com. You can also fine-tune your Research Alert email preferences at https://www.clsa.com/member/tools/email_alert/. Companies mentioned LinkedIn (LNKD US - US$180.64 - BUY)¹ Amazon (AMZN US - US$312.99 - OUTPERFORM)¹ AOL (AOL US - US$38.55 - UNDERPERFORM)¹ Baidu (BIDU US - US$216.05 - BUY)² Ctrip (CTRP US - US$64.03 - OUTPERFORM)² eBay (EBAY US - US$52.80 - BUY)¹ Expedia Inc (N-R) Facebook (FB US - US$72.65 - BUY)¹ Google (GOOGL US - US$571.60 - BUY)¹ Monster Worldwide (N-R) Priceline (N-R) Sina (N-R) Tencent (700 HK - HK$128.40 - BUY)² TripAdvisor (N-R) Twitter (N-R) Zynga (ZNGA US - US$2.92 - UNDERPERFORM)¹ ¹ Covered by CLSA Americas; ² Covered by CLSA Analyst certification The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report. Important disclosures Recommendation history of LinkedIn Corp LNKD US Date Rec Target Date Rec Target 07 Feb 2014 BUY 265.00 03 May 2013 BUY 218.00 05 Sep 2013 BUY 300.00 08 Feb 2013 BUY 161.00 02 Aug 2013 BUY 260.00 10 Jan 2013 O-PF 133.00 Source: CLSA. Credit Agricole Securities (USA) dropped coverage on 24 May 2013; CLSA Americas initiated coverage on 27 May 2013. 100 150 200 250 300 Stockprice(US$) Sep 11 Jan 12 May 12 Sep 12 Jan 13 May 13 Sep 13 Jan 14 May 14 James Lee Other analysts No coverage BUY U-PF N-R O-PF SELL
  9. 9. Important disclosures LinkedIn - BUY 1 August 2014 james.lee@clsa.com 9 The policy of CLSA (which for the purpose of this disclosure includes subsidiaries of CLSA B.V. and CLSA Americas, LLC ("CLSA Americas")) and Credit Agricole Securities Taiwan Co., Ltd. (“CA Taiwan”) is to only publish research that is impartial, independent, clear, fair, and not misleading. Analysts may not receive compensation from the companies they cover. Regulations or market practice of some jurisdictions/markets prescribe certain disclosures to be made for certain actual, potential or perceived conflicts of interests relating to a research report as below. This research disclosure should be read in conjunction with the research disclaimer as set out at www.clsa.com/disclaimer.html and the applicable regulation of the concerned market where the analyst is stationed and hence subject to. This research disclosure is for your information only and does not constitute any recommendation, representation or warranty. Absence of a discloseable position should not be taken as endorsement on the validity or quality of the research report or recommendation. Neither analysts nor their household members/associates may have a financial interest in, or be an officer, director or advisory board member of companies covered by the analyst unless disclosed herein. Unless specified otherwise, CLSA/CLSA Americas/CA Taiwan did not receive investment banking/non-investment banking income from, and did not manage/co-manage a public offering for, the listed company during the past 12 months, and it does not expect to receive investment banking compensation from the listed company within the coming three months. Unless mentioned otherwise, CLSA/CLSA Americas/CA Taiwan does not own a discloseable position, and does not make a market, in the securities. The analysts included herein hereby certify that the views expressed in this research report accurately reflect their own personal views about the securities and/or the issuers and that unless disclosed otherwise, no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report or revenue from investment banking services provided. The analyst/s also states/s and confirm/s that he has/have not been placed under any undue influence, intervention or pressure by any person/s in compiling this research report. In addition, the analysts included herein attest that they were not in possession of any material, non-public information regarding the subject company at the time of publication of the report. Save from the disclosure below (if any), the analyst(s) is/are not aware of any material conflict of interest. Key to CLSA/CLSA Americas/CA Taiwan investment rankings: BUY: Total stock return (including dividends) expected to exceed 20%; O-PF: Total expected return below 20% but exceeding market return; U-PF: Total expected return positive but below market return; SELL: Total expected return to be negative. For relative performance, we benchmark the 12-month total forecast return (including dividends) for the stock against the 12- month forecast return (including dividends) for the market on which the stock trades. For example, in the case of US stock, the recommendation is relative to the expected return for S&P of 10%. Exceptions may be made depending upon prevailing market conditions. We define as “Double Baggers” stocks we expect to yield 100% or more (including dividends) within three years. Overall rating distribution for CLSA/CLSA Americas/CA Taiwan Universe: Buy / Outperform - CLSA: 61%; CLSA Americas: 60%; CA Taiwan: 62%, Underperform / Sell - CLSA: 39%; CLSA Americas: 40%; CA Taiwan: 38%, Restricted - CLSA: 0%; CLSA Americas: 0%; CA Taiwan: 0%. Data as of 30 June 2014. Investment banking clients as a % of rating category: Buy / Outperform - CLSA: 65%; CLSA Americas: 0%; CA Taiwan: 0%, Underperform / Sell - CLSA: 35%; CLSA Americas: 0%; CA Taiwan: 0%, Restricted - CLSA: 0%; CLSA Americas: 0%; CA Taiwan: 0%. Data for 12-month period ending 30 June 2014. For a history of the recommendations and price targets for companies mentioned in this report, as well as company specific disclosures, please write to: (a) CLSA Americas, Compliance Department, 1301 Avenue of the Americas, 15th Floor, New York, New York 10019-6022; (b) CLSA, Group Compliance, 18/F, One Pacific Place, 88 Queensway, Hong Kong and/or; (c) CA Taiwan Compliance (27/F, 95, Section 2 Dun Hua South Road, Taipei 10682, Taiwan, telephone (886) 2 2326 8188). © 2014 CLSA Limited, CLSA Americas, LLC (“CLSA Americas”) and/or Credit Agricole Securities Taiwan Co., Ltd. (“CA Taiwan”) This publication/communication is subject to and incorporates the terms and conditions of use set out on the www.clsa.com website. Neither the publication/communication nor any portion hereof may be reprinted, sold or
  10. 10. Important disclosures LinkedIn - BUY 1 August 2014 james.lee@clsa.com 10 redistributed without the written consent of CLSA group of companies (excluding CLSA Americas, LLC) (“CLSA”), CLSA Americas (a broker-dealer registered with the US Securities and Exchange Commission and an affiliate of CLSA) and/or CA Taiwan. CLSA, CLSA Americas and CA Taiwan has/have produced this publication/communication for private circulation to professional, institutional and/or wholesale clients only. The information, opinions and estimates herein are not directed at, or intended for distribution to or use by, any person or entity in any jurisdiction where doing so would be contrary to law or regulation or which would subject CLSA, CLSA Americas and/or CA Taiwan to any additional registration or licensing requirement within such jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable. Such information has not been independently verified and we make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgment of CLSA, CLSA Americas and/or CA Taiwan at the date of this publication/communication and are subject to change at any time without notice. Where any part of the information, opinions or estimates contained herein reflects the views and opinions of a sales person or a non-analyst, such views and opinions may not correspond to the published view of CLSA, CLSA Americas and/or CA Taiwan. This is not a solicitation or any offer to buy or sell. This publication/communication is for information purposes only and does not constitute any recommendation, representation, warranty or guarantee of performance. Any price target given in the report may be projected from one or more valuation models and hence any price target may be subject to the inherent risk of the selected model as well as other external risk factors. This is not intended to provide professional, investment or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation or needs of individual recipients. Before acting on any information in this publication/communication, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice, including tax advice. CLSA, CLSA Americas and/or CA Taiwan do/does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein. 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This publication/communication is distributed for and on behalf of CLSA Limited (for research compiled by non-US and non-Taiwan analyst(s)), CLSA Americas (for research compiled by US analyst(s)) and/or CA Taiwan (for research compiled by Taiwan analyst(s)) in Australia by CLSA Australia Pty Ltd; in Hong Kong by CLSA Limited; in India by CLSA India Ltd (Address: 8/F, Dalamal House, Nariman Point, Mumbai 400021. Tel No: +91-22-66505050. Fax No: +91-22-22840271; CIN: U67120MH1994PLC083118; SEBI Registration No: BSE Capital Market Segment: INB011499135; BSE F&O Segment: INF011499135; NSE Capital Market Segment: INB231499139 ; NSE F&O Segment: INF231499139); in Indonesia by PT CLSA Indonesia; in Japan by CLSA Securities Japan Co., Ltd; in Korea by CLSA Securities Korea Ltd; in Malaysia by CLSA Securities Malaysia Sdn Bhd; in the Philippines by CLSA
  11. 11. Important disclosures LinkedIn - BUY 1 August 2014 james.lee@clsa.com 11 Philippines Inc (a member of Philippine Stock Exchange and Securities Investors Protection Fund); in Thailand by CLSA Securities (Thailand) Limited; in Taiwan by CA Taiwan and in United Kingdom by CLSA (UK). United States of America: Where any section of the research is compiled by US analyst(s), it is distributed by CLSA Americas. Where any section is compiled by non-US analyst(s), it is distributed into the United States by CLSA solely to persons who qualify as "Major US Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934 and who deal with CLSA Americas. However, the delivery of this research report to any person in the United States shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. Any recipient of this research in the United States wishing to effect a transaction in any security mentioned herein should do so by contacting CLSA Americas. United Kingdom: In the United Kingdom, this research is a marketing communication. It has not been prepared in accordance with the legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The research is disseminated in the EU by CLSA (UK), which is authorised and regulated by the Financial Conduct Authority. This document is directed at persons having professional experience in matters relating to investments as defined in Article 19 of the FSMA 2000 (Financial Promotion) Order 2005. Any investment activity to which it relates is only available to such persons. If you do not have professional experience in matters relating to investments you should not rely on this document. Where the research material is compiled by the UK analyst(s), it is produced and disseminated by CLSA (UK). For the purposes of the Financial Conduct Rules this research is prepared and intended as substantive research material. Singapore: This publication/communication is distributed for and on behalf of CLSA Limited (for research compiled by non-US and non-Taiwan analyst(s)), CLSA Americas (for research compiled by US analyst(s) and/or CA Taiwan (for research compiled by Taiwan analyst(s)) in Singapore through CLSA Singapore Pte Ltd solely to persons who qualify as Institutional, Accredited and Expert Investors only, as defined in s.4A(1) of the Securities and Futures Act. Pursuant to Paragraphs 33, 34, 35 and 36 of the Financial Advisers (Amendment) Regulations 2005 with regards to an Accredited Investor, Expert Investor or Overseas Investor, sections 25, 27 and 36 of the Financial Adviser Act shall not apply to CLSA Singapore Pte Ltd. Please contact CLSA Singapore Pte Ltd in connection with queries on the report. MCI (P) 018-12-2013 The analysts/contributors to this publication/communication may be employed by a Credit Agricole, CLSA or CITIC Securities company which is different from the entity that distributes the publication/communication in the respective jurisdictions. MSCI-sourced information is the exclusive property of Morgan Stanley Capital International Inc (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are service marks of MSCI and its affiliates. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard & Poor's. GICS is a service mark of MSCI and S&P and has been licensed for use by CLSA. EVA® is a registered trademark of Stern, Stewart & Co. "CL" in charts and tables stands for CLSA/CLSA Americas/CA Taiwan estimates unless otherwise noted in the source.

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