LinkedIn Shares Have A Bit Further To Fall Before Bulls Stand Their Ground

LinkedIn Corp LNKD stock has deteriorated quickly along with the broader market, except LinkedIn clearly topped out (on September 9) prior to the market doing so on September 18.

Just as the S&P 500 may have some short-term support just below Friday's close, LinkedIn appears to have some potential Fibonacci support just below current levels. Technicians point out, however, that the trading pattern in LinkedIn is not supportive of the nearby Fibonacci support holding up this time around. Let's take a look at the overall picture for LinkedIn to make sure all analytical bases are covered.

LinkedIn Fundamentals

LinkedIn is the picture of a “growth” stock in that it is in a hot-to-trot sector (social media), sports a clean balance sheet and terrific revenue and earnings growth estimates for next year. However, that package of attractive attributes comes with a very hefty price.

LinkedIn is extremely expensive. The price-to-book, price-to-sales and price-to-earnings come in at 8.61, 13.41 and over 70, respectively. The PE ratio of 70+ is not helped out by the fact that revenue and earnings growth estimates for 2015 come in at 33.4 percent and 47.1 percent, respectively

Technical Take

Technicians acknowledge the 50 percent Fibonacci retracement line support at $193.80, but note that the trading pattern indicates that LinkedIn is likely headed down to the 61.8 percent retracement line just below $185 instead. That level corresponds well with the 100 percent Fibonacci price projection for the “c” wave of what appears to be an “abc” downside correction in progress. They note that as long as that support holds up (around $184.73), a move back up to the early September highs in the $220-$230 area may play out.

The growth investors out there will not stick around long if they feel the attractive and uncommon growth rates that are currently projected will fail to come to fruition.