LinkedIn unveiled its website 10 years ago this week, from a tiny Silicon Valley office next door to an emerging social-networking service called Friendster. A decade later, Friendster is kaput and LinkedIn is going strong, boasting 225 million users and a stock price that's almost quadrupled since the company's public debut in 2011.
The challenge for chief executive officer Jeff Weiner and co-founder and chairman Reid Hoffman is to avoid becoming another internet also-ran by continuing to add products as membership growth slows. With a stock that trades at more than 120 times projected earnings for next year, more than twice Facebook's ratio, investor expectations are unrealistic, said Michael Pachter, an analyst at Wedbush Securities in Los Angeles. "I have trouble with hundred multiples," said Pachter, who recommends holding the stock. Facebook, the largest social-networking site, trades at 48 times the earnings, while ratios for Google and Yahoo are less than 20.
In 2007, LinkedIn recorded sales of $32.5 million. Five years later, the figure expanded to $972.3 million. Analysts expect revenue of $1.5 billion in 2013, according to data compiled by Bloomberg. Still, the number of new members LinkedIn is adding each year is slowing. Membership increased 36% in the first quarter from a year earlier, down from 39% in prior period and 43% in the third quarter.