LinkedIn (Photo : Reuters)
LinkedIn, the world's largest professional networking site, recently announced that its sales and revenue in the last quarter had beaten analysts' expectations. However, the company's shares dropped 10 percent on July 31, Friday, its biggest decline over a day since the end of April.
LinkedIn's shares fell $21 to only over $205, or just above 10 percent, after soaring around 12 percent on July 30, Thursday. Similarly, the company experienced a steep decline by the end of April, when its shares fell almost $50 in a day, according to Fortune.
In its Q2 report, the professional social media site reported a better-than-expected 33 percent revenue increase to 711.7 million, most of which came from its business servicing recruiters and others, Reuters noted.
The company's earnings of 55 cents per share in the last three months of 2015 was a bit higher than what analysts had expected, which was 30 cents per share, according to CNBC. However, despite LinkedIn's earnings beat some analysts believe that the quarterly report shows the company's growth may be slowing down.
"You could look at margins that are showing some compression," Ken Sena, an analyst at Evercore ISI, told the publication. "You could look at some flattening in the user growth on a sequential basis, and I think when you take all those things together and you put it against the fact that LinkedIn is still a growth stock, I think it's just difficult to justify the current valuation."
Citi analyst Mark May also said that the stock market "was expecting a nice core organic beat" in Q2, which LinkedIn did not get, and LinkedIn lowered its guidance for 2015.
"This is the second quarter in a row that the company had to lower its guidance," May noted adding that taking into account all these factors, it shows "a deceleration in growth within LinkedIn, and that justifying its value was becoming increasingly difficult."
The company has been spending a great deal on buying businesses and boosting its sales and development teams in an effort to leverage off the site's around 380 million members.
Earlier this year, LinkedIn bought Lynda, an online learning platform specializing in video courses, which is expected to bring in a revenue boost for LinkedIn in 2016. However, taking out revenue from Lynda, estimates for the company's core business seems to be declining.
