LinkedIn beats estimates, but stock falls on disappointing sales forecast

Linked posted slightly better sales and earnings in the first quarter but the professional social network's shares still fell in after-hours trading after a revenue forecast that disappointed expectations.

The company spooked investors with a revenue forecast of $500 million to $505 million in the current quarter, compared with the average Wall Street forecast of $505.1 million. Even though LinkedIn raised its full-year sales guidance from an earlier forecast, the company's $2.06 billion to $2.08 billion estimate still came in shy of analysts' $2.11 billion target.

For the quarter ended March 31, LinkedIn posted revenue of $473.2 million, up 46 percent from the year-ago quarter. It lost $13.4 million for the period, but earnings per share on an adjusted basis were 38 cents.

The results slightly beat Wall Street's estimates. Analysts expected $466.57 million in revenue and adjusted earnings per share of 34 cents.

"Q1 was a strong quarter for LinkedIn across both member engagement and financial results," CEO Jeff Weiner said during a conference call. "We made significant progress against several key strategic priorities, such as international expansion via China, professional publishing, and the shift to content marketing."

In the three months since LinkedIn's fourth quarter, the company's stock has lost around 29 percent of its value. In part, the decline reflected uncertainty around its transition to native advertisements and the costs associated around that. LinkedIn announced at the same time that it had agreed to purchase job site Bright for $120 million in cash and stock.

And like several other high-flying Internet stocks, LinkedIn has been a victim of the recent market turbulence. Even though it beat sales estimates for the sixth straight quarter, the company's shares were down more than 3 percent in after-hours trading on Thursday. LinkedIn finished today at $161.22, up $7.75 a share, or about 5 percent. That's compared with its 52-week high of $257.56.

Despite the company's recent stock slump, both RBC Capital Markets and Cantor Fitzgerald have put out reports making the case why LinkedIn's fundamentals remain strong. They issued 12-month price targets of $250 and $240, respectively, heading into today's earnings call.

LinkedIn makes money from three distinct businesses: tools for recruiters (Talent Solutions), display ads and sponsored updates (Marketing Solutions), and member fees (Premium Subscription). Historically, the recruiter tools have brought in more than 50 percent of revenue with the other two businesses splitting the difference.

In the first quarter, the company's Talent Solutions grew by 50 percent to bring in $275.9 million in revenue for 58 percent of total revenue. The company's in-transition ad business, which is being closely watched, produced revenue of $101.8 million, up 36 percent from one year ago. Revenue from subscriptions totaled $95.5 million, an increase of 46 percent compared to the first quarter of 2013.

LinkedIn's new ad business, sponsored updates, now accounts for 19 percent of revenue for Marketing Solutions, an increase from 13 percent last quarter, the company said.

Earlier in the month, the professional network shared that it had surpassed 300 million members. As measured by comScore, which doesn't include mobile figures, LinkedIn and its SlideShare property combined for an average of 186 million monthly unique visitors during the first three months of the year. The company does, however, expect mobile to account for more than half of total traffic later in the year.

"The value we deliver to members remains consistent -- we enable professionals to build and manage their identities; create and leverage their professional networks; and gain the knowledge they need to be more successful in their careers, across multiple screens and devices," Weiner said.