Whenever a CEO of a publicly traded company calls up the analyst who downgraded his/her stock and bitch slaps him or her, that is a stock I want to short. This is a time tested rule that tends to reward very nicely.
So what CEO did that recently? Why none other than CEO of LinkedIn $LNKD Jeff Weiner. Apparently, Weiner called Morgan Stanley after they downgraded the stock on March 16th and caused quite a storm. On March 15th, the stock closed at $115.58 and on the 16th closed at $109.81 after hitting a low of $107.99.
The entire buyside and sellside that focuses on tech is aware of this temper tantrum. A miss this next quarter could send it into another free fall. The drop last quarter from $192.29 to $108.38 was pretty painful but could it be repeated on April 28th when it reports again.
No one likes a bully and in fact many hedgies know that the only way to treat a bully is to punch him in the face.
The stock peaked at $276.18 in February of 2015 and has been in free fall ever since. Clearly, LinkedIn is no Facebook. Hard to figure out why Weiner would be pissed about a drop of about $8 when it had fallen by almost $170 since last year.
There is no one short this name as its short ratio is 1.58. We may see shorts coming into this name when we get the next short interest data on April 11th after the close. Institutions are not buying the shares as the Erlanger Volume Swing (EVS) is still negative on a daily and weekly basis. A retest of $100 seems in order if not a move $60.14 which is where it traded in the first month after it came public.
I have recommended this as a short in the Erlanger Research Model Short Portfolio as well as the Consumer Tech Portfolio on March 14, 2016. Clearly, the Morgan Stanley analyst and me have great timing. Could LinkedIn be the next Twitter????
If you enjoy the content at iBankCoin, please follow us on Twitter
What’s not to like about LNKD?
It has negative earnings for several quarters, SG&A is a monstrous 50% of Revenue, 1/3 of it’s stockholder equity is Goodwill. Throw a bone and assume $200M in Annual Income and the PE is STILL 75.
That’s what not to like.
Strange…their press release says that “Non-GAAP diluted EPS was $2.84 in 2015.” What’s up with that? Let’s look at their 10-K filing. Oh, wait, the $2.84 numbers is such utter horse excrement that they **never even mention it** in their filing.
However, they do “include adjusted EBITDA in this Annual Report on Form 10-K because it is a key measure used by our management and board of directors.” Okay, so what is the EBITDA? $779M. That’s downright respectable. How do they get to -$129M (GAAP) from there? Well, $420M in depreciation and amortization, but that doesn’t count because old stuff really is as good as new stuff. Okay, so that gest us to +$291M. So now you just add in $510M in stock based compensation and ther you have the $800M in earnings.. That’s perverse. Well, the good news is that stock-based compensation costs will likely go down this year…
I think the only thing holding this up is the mistaken belief that because it has already fallen 66%, it must be a good value now.
Also agree that arguing with an analyst is a sign of weakness. If your compnay was really hot stuff, then you just release your earnings surprise and make the analyst look like a fool.
LNKD has been really pushing the premium side trying to get revenue, offering coupons for advertising and limited free offers to Lynda etc. Pushing hard for marginal revenue.
Analysts are gossip columnists with lower ethics. Why shouldn’t a CEO push back at someone who thinks he or she knows what’s going on but likely doesn’t or perhaps has ulterior motives for their opinion. Sometimes a double-handed bitch-slappin is warranted.
It’s not that they *shouldn’t* push back, it’s just that it seems like a waste of effort. Instead, just put out a press release and say that the analyst is full of sh!t or even something on Twitter. If it’s a minor analyst, you can just ignore them.
Calling an analyst seems desperate, as if you are hiding something.