The Massive Morgan Stanley Note Moving LinkedIn

A new, massive 30-plus page report issued by Morgan Stanley has sent LinkedIn Corp LNKD up almost 2 percent on Thursday. The firm initiated the stock with an Over-Weight rating and a $310 price target.

According to the report, LinkedIn's "earnings power is still under appreciated."

Related Link: Morgan Stanley Thinks Priceline Is Now Worth $1,300

Investment Thesis

• Analysts see LinkedIn's platform monetization continuing to improve, "leading to faster-than-expected top-line growth and margin expansion."
• Talent Solutions still has a long runway of customer and revenue growth ahead. The analysts add: "32% of large US enterprises are still not paying LinkedIn customers and only 9% of 87,000 US SMBs are on the platform."
• LinkedIn is "the Facebook for professionals. LinkedIn's industry-leading engagement, improving ad unit offerings, targeting and pricing (ROI-based CPCs) position it to become the FB for advertisers seeking to reach professionals. This will drive 26% forward Marketing Solutions growth over the next four years."

Key Drivers

• Talent Solutions has a long runway ahead, even in spite of its already high penetration levels in certain industries.
• Marketing Solutions is poised to become the Facebook Inc FB for professionals and B2B advertising.
• Sales Navigator is "the next monetization seed addressing 825mn sales professionals (2018E)."

Potential Catalysts

• Faster than expected revenue and EBITDA growth from Talent Solutions and Marketing Solutions.
• "Better than expected user growth and engagement, which will drive Marketing Solutions monetization higher."
• Evidence of Sales Navigator acquiring traction.

Risks To Achieving Price Target

• Keeping the Wall Street earnings beats going is never easy.
• "Materially slower than expected Talent Solutions customer growth could call into question the addressable market."
• "Execution risk of multiple new investments, including Marketing Solutions, Sales Navigator, and China."