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LinkedIn earnings beat, but outlook falls short

LinkedIn reported quarterly earnings and revenue that beat Wall Street's expectations after the closing bell on Tuesday.

The company's shares fell sharply in trading Wednesday. (Click here to get the latest quote.)

The stock has a high valuation and faces little competition, said Gene Munster, a senior research analyst at Piper Jaffray.

"It's the unchallenged leader in a $27 billion market, in terms of the overall social market in the recruiting market, and it's $1.5 billion revenue business today," he said.

LinkedIn's dizzying valuation—it is trading at roughly 158 times forward earnings, compared with Facebook's 70 times and Google's 23—has heightened scrutiny on whether the company can maintain its growth streak.

LinkedIn said its monthly users rose to 259 million during the quarter, a 38-percent rise from a year ago.

The stock has a high valuation and faces little competition, said Gene Munster, a senior research analyst at Piper Jaffray.

"It's the unchallenged leader in a $27 billion market, in terms of the overall social market in the recruiting market, and it's $1.5 billion revenue business today," he said.

LinkedIn's dizzying valuation—it is trading at roughly 158 times forward earnings, compared with Facebook's 70 times and Google's 23—has heightened scrutiny on whether the company can maintain its growth streak.

LinkedIn said its monthly users rose to 259 million during the quarter, a 38-percent rise from a year ago.

The company posted a third-quarter net loss of $3.4 million, compared to net income of $2.3 million in the year-earlier period.

Excluding items related to tax-affected stock-based compensation expenses and tax-affected amortization of acquired intangible assets, it earned $46.8 million or 39 cents per share, up from $25.1 million or 22 cents a share a year ago.

Revenue increased 56 percent to $ 393 million from $252 million a year ago.

Analysts had expected the professional networking site to report earnings excluding items of 32 cents a share on $385 million in revenue, according to a consensus estimate from Thomson Reuters.

Its outlook disappointed analysts. For the fourth quarter, the company sees revenue in a range of $415 million to $420 million versus analysts estimates of $438 million.

Piper Jaffray's Munster said that he looks past disappointing revenue guidance for the quarter.

LinkedIn is "going to radically change recruitment over the next decade and that's why you've got to look beyond this guidance," he said.

—Reuters contributed to this report.

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