LinkedIn shares drop 35 percent as weak forecast spooks investors

Where Will LinkedIn's Q4 Strength Come From?


(Updates after market open)

By Supantha Mukherjee

Feb 5 (Reuters) - LinkedIn Corp's shares plunged about 35 percent on Friday, wiping out nearly $9 billion of market value, after the social network for professionals shocked Wall Street with a revenue forecast that fell far short of expectations.

The stock sank to a three-year low of $124.51 in early trading, registering its sharpest decline since the company's high-profile public listing in 2011.

At least seven brokerages downgraded the stock from "buy" to "hold" or their equivalents, saying the company's lofty valuation was no longer justified.

"With a lower growth profile, we believe that LinkedIn should not enjoy the premium multiple it has grown accustomed to," Mizuho Securities USA Inc analysts wrote in a note.

Mizuho downgraded the stock to "neutral" and slashed its target price to $150 from $258.

Raymond James, Cowen and Co, BMO Capital Markets, J.P.Morgan Securities and RBC Capital Markets also downgraded the stock.

LinkedIn has been spending heavily on expansion by buying companies, hiring sales personnel and growing outside the United States, but is now facing pressure in Europe, the Middle East, Africa and Asia-Pacific due to macro-economic issues.

"Given those macro concerns and LinkedIn's recent execution issues, we expect investors will demand financial outperformance before there is meaningful recovery in LNKD's multiple," Goldman Sachs analysts wrote in a client note.

LinkedIn shares have lost nearly a quarter of their value in the last three months. (Reporting by Supantha Mukherjee and Tenzin Pema in Bengaluru; Editing by Saumyadeb Chakrabarty)


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