Shares of LinkedIn plunged more than 40 percent Friday, erasing $10 billion of its market capitalization after announcing weaker-than-expected forward guidance the previous evening.
The social media company reported fourth-quarter earnings and revenue that topped analyst estimates Thursday, but shares in the company tanked in after-hours trading. The slide continued into Friday's regular session, with shares on track for their worst daily performance since going public in 2011, amid a slew of analyst downgrades.
LinkedIn said Thursday that it had adjusted earnings of 94 cents per share on $862 million in revenue in the quarter. Analysts had expected the company to report earnings of about 78 cents per share on $858 million in revenue, according to a consensus estimate from Thomson Reuters.
For the first quarter, LinkedIn said it expects revenue of about $820 million and non-GAAP earnings of about 55 cents per share. Wall Street had on average projected about $868.3 million in revenue and earnings of 75 cents per share for that period, according to StreetAccount.
The company's guidance for first-quarter adjusted earnings before interest, taxes, depreciation and amortization was about $190 million — analysts had forecast about $213.9 million, according to StreetAccount.
"Our strategy in 2016 will increasingly focus on a narrower set of high value, high impact initiatives with the goal of strengthening and driving leverage across our entire portfolio of businesses," LinkedIn CEO Jeff Weiner said in prepared remarks. "Our road map will be supported by greater emphasis on simplicity, prioritization, and ultimate ROI and investment impact."
The company's CFO, Steve Sordello, said in his remarks that the guidance in part reflects "continued pressure" in international markets from "current global economic conditions."
LinkedIn's focus on sponsored content will impact short-term revenue growth in favor of the long term, he added. In the final quarter of 2015, LinkedIn saw a 34 percent increase in revenue from $643 million in the year-earlier period. Adjusted earnings increased 54 percent from 61 cents in Q4 2014.
"It looks like 2016 will really be a year of refocus and reinvestment, and it seems like investors might be taking a pause on this stock right now," Neil Doshi, analyst at Mizuho Securities, told CNBC's "Fast Money" on Thursday.
But James Cakmak, Internet equity research analyst at Monness, Crespi, Hardt & Co., said Wall Street was right in rerating the stock.
"What we saw was weaknesses in the model, inability to sustain the online, self-service growth, and really, the ability to drive new product growth [was] not as robust as we had thought," Cakmak said Friday on CNBC's "Power Lunch."
The company said it ended the fourth quarter with 414 million members, topping average analyst estimates of 409.7 million, according to StreetAccount.
Shares in the professional social network have now fallen more than 50 percent so far this year, trending worse than the major U.S. indexes.
— With reporting by CNBC's Dominic Chu.