This Is Why LinkedIn Is Worth a Look

With its stock price up more than 74% the past 12 months, and sporting a trailing P/E over 800, it's clearly too late to invest in professional networking titan LinkedIn , right? Traditionally, stocks with sky-high valuations and increasing competition should be avoided like the plague, not seriously considered for your portfolio. But there's a sound basis for LinkedIn's stellar share price run, and according to CEO Jeff Weiner, a good thing is going to get even better.

Already sound
Multiple revenue streams are valuable, stabilizing influences for any company. But for newer, growth-oriented Internet companies with long-term aspirations, revenue diversification isn't just a nicety -- it's a necessity. As demonstrated in LinkedIn's most recent Q4 earnings announcement, its three core business units -- Talent Solutions, Marketing Solutions, and Premium Subscriptions -- all added significantly to the bottom line.

Compared with 2011's fourth quarter, LinkedIn saw increases of 90%, 68%, and 79% from its three divisions, respectively, and finished last year with nearly $1 billion in revenues. And barring a catastrophe, LinkedIn will blow past $1 billion in annual revenue this year, with room to spare. Yes, LinkedIn's talent solutions division continues to make up over 50% of total sales, which is slightly disconcerting. But Weiner and team are changing the enterprise concept to expand its influence, and its revenue opportunities, even further.

The future of LinkedIn
At the recent Morgan Stanley Tech, Media, and Telecom conference, Weiner admitted that LinkedIn's current professional networking is nearly always done publicly, and that's a shortcoming. Though the public sharing model is clearly working, as the growth in sales and its 200 million users will attest, LinkedIn lacks a strong ability to communicate, update data, and manage sales cycles privately.

The notion of LinkedIn as an enterprise tool, behind the firewall, is nothing new. Weiner and team have discussed the need to expand to corporate enterprise and relationship management solutions for a couple of years. Now, taking the enterprise solutions model a step further, LinkedIn is testing private sharing tools internally, edging closer to the world of online CRM industry-leader salesforce.com .

Facebook , with its 1 billion users and efforts to diversify its existing revenue streams, remains a viable threat to LinkedIn. Should Facebook CEO Mark Zuckerberg decide to really get serious about professional networking, beyond the company's social jobs partnership and free public information-sharing, things would get awfully interesting for LinkedIn, awfully quickly. But in the professional domain, nobody can touch LinkedIn right now, including Facebook. Weiner intends to keep it that way.

And lest we forget, Google and its Google+ service are quickly becoming more than a fast-growing social-media alternative to Facebook. No matter which statistical source you choose to believe (measuring networking usage is hardly an exact science), Google+ is growing by leaps and bounds. And you can bet LinkedIn's keeping tabs on Google+ as its use among professionals continues to expand, placing it directly in LinkedIn's wheelhouse.

Responding to competition from the likes of Facebook and Google is one thing, but developing solutions to take on salesforce.com? It's not as far-fetched as it sounds. LinkedIn introduced its Sales Navigator solution a little over a year ago; it was (and is) designed to use in conjunction with salesforce.com by integrating LinkedIn profiles with existing salesforce.com data. Good plan. At over $24 billion in market cap, salesforce.com has redefined the CRM industry, and sales navigator benefits from salesforce.com's success, generating subscription revenue for LinkedIn.

Now that LinkedIn is conducting in-house testing of an enterprise solution, a legitimate sales support offering for its customers shouldn't be far off. What a new,LinkedIn CRM tool and enterprise product suite will look like, Weiner isn't saying, nor is it critical at this point. The takeaway for shareholders is LinkedIn's continual efforts to expand its business lines, and its proactively taking steps to make it happen.

Now what?
LinkedIn's expectations for 2013 -- as good as they are -- pale in comparison with what offering its customers enterprise and CRM-like tools says to investors. Weiner isn't sitting idly by and enjoying the growth of LinkedIn's business units and stock price; that's not his style.

With a forward P/E of 76 and over 200 million users, LinkedIn is already translating all those users to revenue, justifying its current valuation. LinkedIn's CRM and enterprise solutions, when they're unveiled, will help drive revenue growth, lending even more credence to shareholders' enthusiasm. But more importantly for investors, exploring new solutions suggests a management team that gets it. LinkedIn certainly does.

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The article This Is Why LinkedIn Is Worth a Look originally appeared on Fool.com.

Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, LinkedIn, and salesforce.com and owns shares of Facebook, Google, and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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