Business-oriented social networking company LinkedIn (LNKD) went public in mid-May 2011. From the IPO price of $45 per share, LNKD shot up to as high as $122 before closing at around $94 on the first trading day. The share price slid into the low $60 range over the next month and then rebounded back into the low $90's. All this on a stock about which not much is known, financially speaking.
The Wall Street consensus has LinkedIn losing 8 cents per share in 2011 and earning about 40 cents in 2012. The revenue forecast for 2011 is $530 million with a range of $400 million to $900 million, according to various analysts. Sales are expected to top $1 billion in 2012. With a current market cap of $8.9 billion, investors thus have priced some serious future growth into the LinkedIn share price.
Short sellers are also taking a close look at the stock. The initial offering included a total of approximately 9 million shares. The current short interest in LNKD is reported at 2.3 million shares, or a quarter of the shares sold in the IPO. Daily trading volume is averaging 1.67 million shares per day. So, on a volume basis, short interest is 1.6 days of trading.
With little current financial information available, the share price could be too rich and poised for a tumble, as indicated by the high amount of short interest. Comparing the current level of short interest to the public float, it may be next to impossible to find shares to borrow to short.
One for the books
The flip side could be a short squeeze for the history books if the share price started to increase and those who have lent shares try to call them back. A short squeeze would force the stock higher as shorts enter buy orders to cover their positions. Either way, LinkedIn is not a stock for the faint of heart right now.
Capstone Investments analyst Paul Meeks has a sell rating on LNKD with a target price of $45. Meeks believes the company may not be able to generate the levels of cash flow investors are expecting.
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