Video: LinkedIn Succeeds Where Twitter and Facebook Failed

I chatted with CNBC’s Oriel Morrison last night about LinkedIn (LNKD)’s earnings release:

LinkedIn beat analysts estimates, posting non-GAAP earnings per share exluding stock-based compensation and acquisitions costs of 52 cents. The Street had expected 47 cents.  Revenues for the quarter were $568 million, jumping 45% over the same quarter last year.

LinkedIn shares were up after hours yesterday and are up big today.  On this count, LNKD is bucking the trend of its social media rivals.  Facebook (FB) and Twitter (TWTR) both released earnings earlier this month and saw their stocks pounded afterwards.  Investors were less than impressed with Twitter’s slowing user growth and with Facebook’s lack of cost control.

Other “new tech” companies like Amazon.com (AMZN) and Netflix (NFLX) have taken their licks as well. Investors are losing patience with the “river of no returns” and expecting profitability.  And Netflix discovered that its customers are far more price sensitive that any of us had realized.  It turns out that raising the monthly subscription cost by a single dollar materially cuts into new subscriber growth.

Perhaps it is because they went into the release with such low expectations, but investors saw nothing in LinkedIn’s numbers they didn’t like.

Still, I’m not a buyer at these prices.  When you take into account the shareholder dilution from the new shares that LinkedIn creates for its employees, the company actually lost money last quarter.  And it trades for over 13 times sales and 70 times next year’s expected earnings. That’s far too pricey for my liking.

Oriel asked what I buying these days, and my answer was Brazil.  Brazil is one of the most hated markets in the world right now, but the pricing is cheap.  As I wrote recently, Brazilian stocks are priced to deliver annual returns of about 9% over the next 10 years as compared to about 1% in American stocks.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

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