"They're fundamentally different companies; Google and Facebook are ad revenue businesses, and LinkedIn is 60 or 65 percent enterprise subscription revenue," said RBC analyst Mark Mahaney, who cut his rating on the company from Outperform to Sector Perform and slashed his price target to $156 from $300.
Each of LinkedIn's three businesses is facing its own challenges. LinkedIn cited softness in Europe, the Middle East, Africa and the Asia Pacific Region. "Today we hear Obama talking about global weakness impacting U.S. firms, and LinkedIn is a great example of that," said Mahaney. "It's a little surprising that Facebook and Google didn't call it out, maybe they're having such strength in the business."
And expectations of a robust subscription business are falling flat. "Companies with high predictability do get valuations that are at significant premiums to other Internet companies," said James Cakmak, an analyst at Monness, Crespi, Hardt & Co. "As a result of this lack of confidence in LinkedIn's topline, the valuations associated with this will be chopped in half from where we were yesterday. This is a confidence issue, a predictability issue, and it's not something that's going to be fixed overnight."
LinkedIn's marketing solutions business, which is shifting away from display ads towards sponsored updates is facing tough competition from Facebook and Google. "Ad dollars on the Internet are concentrating on Google and Facebook, and if you're not one of those two you're really getting scraps," said Mahaney. "LinkedIn's value proposition to advertisers isn't as compelling as Google and Facebook."