LinkedIn delivered a strong earnings performance last night, blowing away expectations, and the stock is up 8% in pre-market trading.Analyst Michael Graham at Canaccord Genuity raised his full year estimates for the company, upped his price target to $95, and wrote, “LinkedIn takes another step on the path toward becoming the default global hiring solution.”
Why is Graham so impressed by LinkedIn? The multiple revenue streams that are growing well.
Here is his breakdown of the business:
Hiring Solutions revenue for the quarter grew 136% y/y, fastest than any other segment, to $84.9 million, in line with our estimate but above Street consensus of $82.8 million. During the quarter, the company added 1,870 new Corporate Solution customers, bringing up the total to 9,236. Of note, LCS revenue per customer experienced a 10% increase y/y, highlighting pricing stability and the company’s efforts to further penetrate existing accounts despite downward pressure from penetration of lower revenue-per-account SMB market.
Marketing Solutions revenue grew 77% y/y to $49.5 million, beating our estimate of $45.7 million and consensus of $45.5 million. On the conference call, management indicated that display ad sales continued to outpace market growth despite headwinds in Europe, which had led to some customers pushing out or scaling back marketing spending. The company continues to see inventory demand outpacing supply.
This is despite the company’s disclosure that it has yet to meaningfully monetise mobile usage through advertising. According to management, mobile usage now represents 16% of LNKD’s member page views, and the company will attempt to run tests on marketing solutions within the mobile environment. As with most other Internet companies, we believe this represents a large revenue opportunity that should unfold over the course of 2012-2013.
Revenue from Premium Subscriptions grew 87% y/y, accelerating for the seventh consecutive quarter, to $33.3 million, beating our estimate of $31.6 million and consensus estimate of $29.7 million. This y/y growth was even higher (115%) if subscription revenue that’s categorized under Hiring Solutions is included. Members paying for subscriptions doubled y/y as the company increased penetration of the member base and saw a shift from monthly to annual contracts.
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