The Buzz

All markets and investing news all the time

LinkedIn: The anti-Facebook

May 23, 2012: 10:06 AM ET

Maybe Facebook (FB) stock will be trading much higher in May 2013 than where it is right now. Maybe not. But investors shouldn't dismiss all social media as a fad just because Facebook's IPO has so far been more FaceBust than FaceBoom. LinkedIn (LNKD), often described as a FaceBook for professionals, went public just about a year ago. It's stock surged on its first day of trading, gaining 109%. But it's also up nearly another 10% from that gaudy first day close.

Yes. critics will note that LinkedIn is still 18% below the peak intra-day price of $122.70 on its debut day. And while LinkedIn, trading at more than 150 times 2012 earnings forecasts, is arguably as overvalued (if not more so) than Facebook, I think investors appreciate the fact that LinkedIn is not a one-trick pony. The company does not rely on advertising. It only accounts for about 26% of sales. And while Sean Parker may probably think that it's not cool to charge customers fees, LinkedIn rakes in a big, dependable recurring revenue stream from businesses that are looking to recruit talent and from job hunters who want more than what the free service provides.

Expectations for LinkedIn are ridiculously high. But the stock might just be worth it if the company is able to live up to the hype. After all, earnings per share are expected to nearly double this year and in 2013. LinkedIn may be less sexy than Facebook and other recent social IPOs like Groupon (GRPN), Yelp (YELP) and Zynga (ZNGA). But it's growing more rapidly than most of the other social upstarts ... and it has a more diverse business model. Boring is often beautiful in the stock market ... and that may be the case even in a sector as dynamic as the Internet.

Join the Conversation
Fear & Greed
Sponsored by
About This Author
Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

To view my watchlist

Not a member yet?

Sign up now for a free account
Stupid Stock Move of the Day
#StupidStock Move of the Day! Yes, Urban Outfitters may be finally turnings things around. But $URBN up 17%? Seems a bit excessive, no?
Powered by VIP.