1-Star Stocks Poised to Plunge: LinkedIn?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online professional network operator LinkedIn (NYS: LNKD) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at LinkedIn's business and see what CAPS investors are saying about the stock right now.

LinkedInfacts

Headquarters (founded)Mountain View, Calif. (2002)
Market Cap$10.5 billion
IndustryInternet information providers
Trailing-12-Month Revenue$616.7 million
ManagementCo-founder/Chairman Reid Hoffman
CEO Jeffrey Weiner
Trailing-12-Month Return on Equity3.7%
Cash/Debt$620.8 million / $0
CompetitorsFacebook
Jigsaw Data Corp.
Monster Worldwide

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 80% of the 1,083 members who have rated LinkedIn believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those Fools, jed71, touched on the stock's seemingly unsustainable valuation:

Based on fundamentals, business should be trading at closer to $45 per share, a more than 50% haircut from current levels. And I think a $45 price would still be pricing in large revenue/earnings growth over the next 10 plus years. All it's going to take is one quarterly miss, and shareholders will be down greater than 20% in a single day.

[M]aybe I am missing something, but I don't see much of a moat built around this business. They are basically a knock-off of Facebook for professionals. The only time I ever see friends using this site is when they are looking for employment.

Ripe for a large correction!

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of LinkedIn. Motley Fool newsletter services have recommended buying shares of LinkedIn. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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