Thursday, December 8, 2011

LinkedIn Rally (LNKD)

Seems like LinkedIn (LNKD) has experienced a bit of a short squeeze over the past week.

In terms of its ~15x sales and ~15x book valuation, there are only about two dozen U.S. companies that are more expensive. That means that LNKD is well into the 99th percentile of stratospheric valuations. The rest of that cohort consists mainly of pharma and biotech companies that have a lot of option value that isn't captured by book or sales metrics.

Not so with LNKD. It has been around for almost a decade. If there was the possibility for sales or book value growth through retained earnings, you would expect to have seen it by now.

Consider that facebook, which launched after LNKD, has about 7x as many users, but revenue almost 50x higher, yet a valuation only about 10x higher.

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