Here’s Why LinkedIn Corp (LNKD) Is a Risky Bet

At the same time, Facebook Inc (NASDAQ:FB) is more conservatively valued, but it seems like investors want to see real results instead of projections. It affects the stock, which trades way below its IPO price and is down 11% this year.

Monster Worldwide, Inc. (NYSE:MWW) has lost 4% this year, but trades at an attractive 10.74 P/E and 12.2 forward P/E. The company has recently made strategic moves, exiting China, Brazil, Mexico, and Turkey. Monster states that it is exploring opportunities to sell the company to improve shareholder returns. There is no growth story to follow at Monster. Instead, it’s a profitable business that trades at relatively cheap valuations.

Bottom line

In my opinion, there are limits to LinkedIn Corp (NYSE:LNKD)’s growth. The social network would not be able to grow its active user base forever. There is a certain section of people all around the world who are interested in such a network, and it would be hard to get past this point. In the meantime, the enormous forward P/E tells us that investors are expecting very high growth rates. Price-to-sales of 17.74 and price-to-book of 19.83 tell the same story. When the growth targets would not be met, the stock would suffer. I think it’s just a question of time.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook Inc (NASDAQ:FB) and LinkedIn Corp (NYSE:LNKD).

The article Here’s Why LinkedIn Is a Risky Bet originally appeared on Fool.com.

Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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