LinkedIn stock plummets more than 40 percent on weak outlook
Social network beats analysts' fourth-quarter earnings expectations but spooks investors with grim forecast for its first quarter.
LinkedIn's stock is now worth about half what it was a year ago.
LinkedIn's efforts to get professionals excited about its social network are not paying off as fast as some expected, especially investors.
LinkedIn announced Thursday that its fourth-quarter earnings and revenue had topped analysts' estimates. But the company's stock closed down 40 percent on trading Friday after it issued weaker-than-expected guidance. It was the second time in the past nine months the Mountain View, California-based company's stock tanked on earnings news.
LinkedIn's grim prediction comes as the 12-year-old social network retools to attract new users beyond the 400 million it currently boasts. The social network, which helps users find jobs or just connect with others, is free to use but charges for features like advanced search and messaging strangers.
To build up its user base, LinkedIn has been expanding into new markets, including China, and adding new lines of business such as tools for advertising and marketing. To help its members learning the right professional skills, LinkedIn said in April it had reached an agreement to buy Lynda.com, an online training site, for $1.5 billion.
LinkedIn is also trying to improve the functionality of some of its products to increase user engagement. In December, the company unveiled a dramatic revamp of its mobile app, which had been often criticized for being cluttered and difficult to navigate. Improving users' experience on the go is key as more than half of LinkedIn's traffic comes from people checking in on a mobile phone or tablet.
On Thursday, the company reported adjusted earnings of 94 cents per share on $862 million in revenue in its fourth quarter, handily beating analysts' forecasts of 78 cents per share. However, investors were apparently spooked on LinkedIn's guidance for the first quarter, in which it sees adjusted earnings coming in at 55 cents per share, far below analysts' estimates of 74 cents.
"Q4 was a strong quarter for LinkedIn, bringing to a close a successful year of growth and innovation against our long-term roadmap," LinkedIn CEO Jeff Weiner said in a statement. "We enter 2016 with increased focus on core initiatives that will drive leverage across our portfolio of products."
LinkedIn shares took a similar dive in April when the company widely missed analysts' profit estimates, plunging as much as 27 percent in after-hours trading Thursday.
On Thursday, LinkedIn's stock closed up $1.37 to $192.62 in regular trading before its fourth-quarter results were announced. Reaction to the news was swift in after-hours trading, chopping nearly $40 from shares in the first 10 minutes before they settled at $137.11, down $55 and about half its value from a year ago.
By the end of trading Friday, the company's stock was valued at $108.38, down nearly $84.
Update February 5 at 1:04 p.m. PT: Adds additional information about further stock sell-off Friday.