Maybe Facebook should friend LinkedIn?August 3, 2012: 9:58 AM ET
Things were finally looking up for Facebook (FB) on Friday. Shares rose in early trading Friday. If those gains hold, Facebook will snap a six-day losing streak on Wall Street. Have shares finally bottomed? Tough to say. The stock still seems overvalued at about 40 times 2012 earnings forecasts.
Investors are still worried about slowing growth. Big institutions have started to dump the shares. Facebook temporarily dipped below $20 (teenage wasteland!) Thursday. The state of California is now worried that the flubbed IPO may hit its budget. And one entrepreneur is publicly bashing the company for its "acqui-hire" strategy regarding start-ups.
But for one day at least, Facebook investors seemed less worried. And they may have LinkedIn (LNKD) to thank. Shares of the business networking company surged more than 14% Friday thanks to strong second-quarter earnings and a healthy outlook.
LinkedIn, at about 150 times 2012 earnings forecasts, is even more insanely overvalued than Facebook. But it may deserve a premium because it is growing much faster and has a more diverse business model. Sales nearly doubled while Facebook reported last week that revenues were up 32%. LinkedIn doesn't rely on ads as much as Facebook
LinkedIn's strong quarter follows a better-than-expected report from reviews site Yelp (YELP) Wednesday. (Although Yelp merely lost less money than expected.) Other beaten down social stocks, most notably Zynga (ZNGA) and Groupon (GRPN) also got a lift Friday.
But LinkedIn still looks like the best company of the bunch. It may not be the best stock given that triple-digit P/E. But it's proving that a grown-up business model is more exciting than having nearly a billion users who don't click on that many ads. For more on LinkedIn, Facebook and the social scene, check out the Buzz video below.