LinkedIn Corp: Connecting the Dots for Profits

I am optimistic about the potentials inherent in social media stocks despite all the noise in the market about a potential crash of their lofty valuations. Of a truth, some stocks in the social media industry are priced beyond reasonable levels of valuation; yet, we cannot afford to be guilty of hasty generalizations in labelling all social media stocks as overvalued.

LinkedIn Corp (NYSE:LNKD) is an interesting social media stock that has an amazing potential to reward bullish plays irrespective of the level of fear in the market. LinkedIn Corp with its market capitalization of $26.44B is a professional network on the Internet with approximately 277 million members in over 200 countries and territories.

The Company’s Free Solutions includes ability to manage professional identity, ability to build and engage with professional networks, access to knowledge, insights and opportunities. The Company generates revenue across three product lines: Talent Solutions, Marketing Solutions, and Premium Subscriptions.

Why Bullish LinkedIn Plays are Smart

  • Wonderful Top and Bottom Line Results in Q2 2014

One of the reasons to be bullish on LinkedIn is the quality of its second quarter results as it hints of better days ahead. On July 29, LinkedIn delivered second quarter results in which it posted earnings of $0.51 per share to beat analysts’ estimate of $0.39 share. LinkedIn also surprised market watchers on revenue when it posted revenue of $533.9M to surpass the $364M that was reported in the same quarter last year by 47%. Interestingly, the revenue of $533.9M outperforms the average analyst’ revenue of $512M. More so, the revenue also outperforms the management guidance of $500M to $505M.

  • Double-Digit Growth across Reporting Segments

Another interesting takeaway from the second quarter result is the double-digit growth that was delivered in all of LinkedIn’s three reporting segments. I already mentioned that LinkedIn generates revenue from three product lines namely; Talent Solutions, Marketing Solutions, and Premium Subscriptions.

In the recently concluded quarter, Talent Solutions delivered revenue of $322M to mark a 49% year-over-year increase. Marketing Solutions delivered revenues of $106M to mark a 44% year-over-year increase. Premium Subscriptions delivered revenue of $105M to mark a 44% increase in revenue.

  • Strong Presence in Mobile

LinkedIn is working hard to improve the quality of its mobile presence as a means to drive traffic to its products and services. In the first quarter, LinkedIn reported that Mobile was responsible for about 43% of total traffic to its business. In the second quarter, the volume of traffic increased from 43% to 45% of total traffic. The company says it expects the percentage traffic contribution of its Mobile platform to be about 50% of total traffic by the end of this year.

How to Trade LNKD Options

Shares of LinkedIn are trading around $215 per share today to mark 58.1% premium to its 52-week low and to mark a 19.8% discount to its 52-week high. I am bullish on LinkedIn; hence, I believe that the stock has upside potential even if it is only to touch its 52-week high. I recommend the LNKD Jan 2015 220.000 call (LNKD150117C00220000) at an asking price of 19.50. I strongly believe that the contract will be in the money before LinkedIn touches is 52-week high in the next 6 months.

— Daily Option Alerts

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