Solid Quarter for Wide-Moat LinkedIn: Shares Fairly Valued

LinkedIn posted strong double-digit growth in all three segments for the second quarter, growing top line by an impressive 37% to $780 million. Talent solutions, the core driver of the company’s value proposition and largest contributor of revenue, grew 46% (34% organically) as the company’s registered members reached nearly 400 million members. Eighty percent of the net adds were outside the U.S. as international consumers respond to the company’s platform localization efforts, especially Chitu, the networking app designed for the Chinese market. Management announced a similar plan to build a specialized platform for the Indian market, now LinkedIn’s second-largest market base. We were encouraged to see sponsored updates representing more than 50% of the marketing solutions segment, as the company moves away from generic display ads to business-focused ad units which command premium pricing while also supporting continued engagement by the user base.

Growth and engagement was an overarching theme this quarter, and we continue to believe that the company is focused on user experience over near-term revenue contribution. LinkedIn's investment in its mobile application portfolio reflects this strategy, as the company embraces the secular shift from PC to mobile.

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