Investors No Longer Giving LinkedIn The Benefit Of The Doubt?

Barclays’ Paul Vogel downgraded the rating on LinkedIn Corp LNKD from Overweight to Equal Weight, while lowering the price target from $205 to $130.

Slower Revenue, Lower Multiple

Following the 40 percent decline in the stock following the 4Q results, Vogel believes that “there could be a decent period of consolidation in the stock as investors get a handle on the new growth trajectory.”

Vogel explained that LinkedIn has historically been richly values, since the company’s robust revenue growth drove investors to be willing to pay a premium for the stock.

However, with the higher than expected slowing in revenue, the analyst believes that the revenue multiple could be less compelling for investors, due to which the multiple paid was likely to decline meaningfully.

No Benefit Of Doubt

According to the Barclays report, “Given the hiccups over the past year (they have missed 3 of the last 4 quarters) we believe investors are no longer willing to give them the benefit of the doubt and are looking for ways to adequately value the core franchise.”

Due to this, Vogel believes that LinkedIn can only be valued in terms of pro forma numbers, and even in the absence of stock comp and other non-cash charges, most of the company’s metrics are not favorable.

At the same time, the analyst pointed out that the company’s long term opportunity and competitive positioning remained intact, although the path forward was likely to be more volatile and slower than earlier expected.