In the last few years, growth of social media has overwhelmed people across the globe to such an extent that everyone from big business houses to small scale investors is trying to reap some benefit by participating in the tide. It is extremely difficult for any player to just rush into the space and establish its business among the likes of Facebook (FB) and Twitter. However, LinkedIn (NYSE:LNKD) is one such company that has astutely carved out a niche market for itself and created immense value for its shareholders.
The Company Knows the Most Important Part: Good Products
The employment crisis prevailing in countries across Asia and Europe benefited LinkedIn as more and more people got on-board during the quarter to look out for opportunities. As reported, approximately 65% of its members are outside of the U.S. Besides this, the launch of relevant and innovative products throughout the quarter secured greater customer engagement.
- Warning! GuruFocus has detected 2 Warning Signs with LNKD. Click here to check it out.
- LNKD 15-Year Financial Data
- The intrinsic value of LNKD
- Peter Lynch Chart of LNKD
The company released various products with the sole motive of making things convenient for its users. May it be the LinkedIn Contacts, which makes it easier for users to track meaningful conversations or empowering members to add rich media content to their profiles, LinkedIn has adopted the right strategy to survive in this industry — consistent innovation.
As per analysts, LinkedIn’s PEG ratio on a five year forecast is around 2.6, which makes it a reasonable buy as compared to its peers. I say this is a justified valuation keeping in mind that the company is still very young and has a plethora of growth opportunities ahead. Also, the way it is investing money and efforts in innovation, it is sure to pay off handsomely in the near future. The company also saw a commendable increase of 68% in revenue from premium subscriptions, which testifies to the excellent quality of its offerings.
Facebook Is Trying Hard
Facebook’s Graph Search has the potential to become a dangerous threat to LinkedIn as users are using it vigorously to establish professional connections and recruiters are using it to find the best candidates.
It is evident that Facebook is trying every measure possible in order to engage users on the website. Moving ahead, the company will be banking heavily on these new products to get more people on-board. I believe Facebook’s share price will successfully sustain the momentum because of the stupendous growth in mobile ad revenue and frequent launch of new products/features.
Invest in LinkedIn’s Growth
Getting straight to the point, I would happily invest in LinkedIn at this point, not because of its hype but for the growth opportunities that lie ahead. It is difficult to survive in an industry with such fierce competition, but LinkedIn has done it in a magnificent way. The reason for this success lies in its well-placed strategies.
An explosive growth in the next few years will come from mobile and the company has already started working on it. In April 2013, it launched a new iOS and Android app, which saw a 40% lift in mobile engagement than the previous app. I am happy to see that LinkedIn has realized the potential of mobile and started working on it to revamp the experience of its users.
One of the things that has made Google so huge is valuable and mindful acquisitions. Well, LinkedIn has cleverly followed a similar path by adding new businesses to its portfolio with the overall objective of satisfying users. Last year, it acquired the content sharing platform Slideshare, a move that is going to generate huge returns very soon.
To sum it all up, Linkedin is a superb investment for its products, opportunities and an efficient management team.