LinkedIn Corp (NYSE: LNKD)
LinkedIn is having an incredibly rough day in the market today, and for a very good reason. The social networking site designed for professionals is the center of a key downgrade from a highly trusted analyst. Today, we’ll talk about the analyst downgrade, how the market reacted to the news, and what we can expect to see from LNKD moving forward. So, let’s get right to it…
LNKD Is Downgraded By Morgan Stanley
Morgan Stanley is arguably one of the most trusted investment banks and analyst firms in the world. So, when they say something, investors tend to listen. Unfortunately for LinkedIn, Morgan Stanley isn’t quite as impressed with the stock as they once were. Early this morning, the investment bank announced that it had downgraded the stock’s rating from “Overweight” to “Equal-Weight”. Morgan Stanley explained in their research note that LNKD is heading toward several headwinds, primarily a slowdown in growth in enterprise and online talent solutions. On top of downgrading the stock, Morgan Stanley seriously cut the price target on it. The firm made the decision to bring the price target down from $190 to $125, insinuating slight upward growth, but that it’s not likely to ever hit its all time high of $276.18 again. In a statement, the analyst had the following to say…
“LinkedIn isn’t likely to be as big of a platform as we previously thought… LinkedIn’s ability to re-accelerate Talent Solutions growth and/or deliver better than expected results in B2B advertising, Lynda or Sales Navigator could reinvigorate investors and drive the stock back toward our bull case valuation ($200/share)… That said, continued faster than expected deceleration and/or mis-execution will likely cause the stock to be range-bound (best case) or trend toward our bear case valuation ($60/share).”
How The Market Reacted To The News
As investors, time has shown us that the news moves the market. Any time there is good news released associated with a company that’s traded publicly, we can expect to see gains in the stock associated with that company. Adversely, when bad news is released with regard to a publicly traded company, we can expect to see declines in the value of the stock. With that said, one of the most trusted analysts writing a bearish note about a stock is likely to bring it down in a big way, and that’s exactly what we’re seeing from LNKD today. Currently (1:00), the stock is trading at $109.69 per share after a loss of $5.82 per share or 5.04% thus far today.
What We Can Expect To See Moving Forward
While I would love to say that I disagree with Morgan Stanley and that LNKD is likely to climb from here, I simply don’t believe that to be the case. The truth is that I never leave my money in the hands of the analyst, but it seems as though Morgan Stanley hit the nail on the head with this one. LinkedIn is slowly losing popularity. This is happening as a result of a mix between mis-fires on strategy, poor planning, and declines in the need for such a service. If things continue the way they’ve been going for the company, the stock is likely to sink in a big way. Until LNKD comes up with a solid plan for growth and proves to investors that it has the ability to execute on that plan, chances are that we’re likely to see a continuation of downtrends.
What Do You Think?
Where do you think LNKD is headed moving forward and why? Let us know your opinion in the comments below!