Global Equities Research has downgraded shares of LinkedIn (NYSE:LNKD) to equal weight from overweight, saying that the company may probably lose revenue to Google+.
LinkedIn, a business-related social networking site, was launched in May 2003 and started trading on the NYSE in May 2011.
The brokerage has reduced its fiscal 2011 earnings estimate to 4 cents a share from 8 cents a share and revenue projection to $507.27 million from $534.28 million. The latest estimates reflect an earnings drop of 76 percent despite a revenue increase of 108 percent from last year. Wall Street expects LinkedIn to earn 3 cents a share on revenue of $510.61 million, according to analysts polled by Thomson Reuters.
The brokerage said it reduced its estimates for LinkedIn to reflect probable revenue share loss to Google+ in the hiring and marketing solutions categories.
Among Facebook, Google and LinkedIn, LinkedIn is the slowest to innovate; LinkedIn developer ecosystem is almost non-existent and their mobility initiatives are still very rudimentary -- which means that LinkedIn Platform is the weakest among these three, analyst Trip Chowdhry wrote in a note to clients.
Developer Ecosystem is almost non-existent, which means that few third party applications are being created on the LinkedIn Platform. It could also mean that LinkedIn may not be able to grow into the adjacent markets, thereby limiting its revenue growth potential, the analyst said.
LinkedIn was built for an Old Era Purchase an in-mail contact business model and this model has too many frictions built-in, which leaves LinkedIn vulnerable to Google Plus - The more LinkedIn tries to monetize its platform the more they will lose their user base is the converged view we got, Chowdhry noted.
Early Google Plus users have already imported their LinkedIn Networks into Google+ circles. It is still early to tell, but if this becomes a trend LinkedIn business will suffer, he added.
Meanwhile, LinkedIn is expected to face tough competition from Google+ as Google is working on a new social programming toolset called Angular, which will help third party developers/providers create B2B Applications on top of Google+ Enterprise Edition.
We expect LinkedIn and Google Plus to collide probably eight months from now, which may result in revenue deterioration for LinkedIn, said Chowdhry, who has a price target of $60 on LinkedIn stock.
Shares of LinkedIn closed Friday's regular trading session at $78.08.