Mish's Global Economic Trend Analysis

LinkedIn Mania Over? Shares Plunge 21% After Hours on Earnings Miss
Employment Compensation Costs (Wages and Benefits) Jump in First Quarter
Initial Unemployment Claims Plunge to 262,000 - Lowest Since April 2000; What's Going On?

LinkedIn Mania Over? Shares Plunge 21% After Hours on Earnings Miss

Posted: 30 Apr 2015 07:38 PM PDT

It's tough predicting the end to manias. Tonight I ponder a 21% plunge in extended hours trading in LinkedIn. Is the mania over?

Please consider LinkedIn Plunges as Second-Quarter Forecast Misses Estimates.

LinkedIn Corp.'s shares plunged as much as 27 percent after the company delivered quarterly revenue that missed analysts' estimates for the first time, shaking confidence in a historically stable business plan.

The professional-networking website also forecast sales that missed projections for the second quarter and cut its guidance for annual revenue, citing the strong U.S. dollar and slower-than-predicted growth.

"This is an extraordinary miss for a company that has by and large avoided any major blowups since going public," said Paul Sweeney, an analyst at Bloomberg Intelligence.

Since its debut as a public company in 2011, LinkedIn has steadily surpassed estimates for sales until now. The company, with its mix of job-related tools for consumers and businesses, has been expanding its offerings every year under Chief Executive Officer Jeff Weiner, through acquisitions and rapid hiring. Those efforts aren't translating to as much revenue growth as expected, Sweeney said.

Second-quarter revenue will be $670 million to $675 million, the company said Thursday. Analysts had predicted $718.3 million, on average, according to data compiled by Bloomberg. LinkedIn also trimmed its forecast for annual revenue to $2.9 billion, from $2.93 billion to $2.95 billion.

The company's shares fell 21 percent in extended trading, after dropping 2 percent to close at $252.13. The stock had gained 9.7 percent this year.

Profit excluding some items was $73 million, or 57 cents a share, matching analysts' predictions. LinkedIn's net loss widened to $42.5 million, or 34 cents a share, from $13.4 million, or 11 cents.

Mania in Pictures

Blame Game

LinkedIn blamed the plunge on strength in the US dollar. It generates 39% of its revenue outside the US.

For the trailing 12 months, linked in lost money. The loss widened from 11 cents a share to 34 cents a share. It has no PE because it has no profit.

Market Cap

Prior to this plunge, LinkedIn had a market cap of $31.74 Billion.

Why?

On the theory that everyone in the world will link to everyone else in the world.

I see no value in paying anything for such services. If others come to the same conclusion, I wonder if LinkedIn will ever turn much of a profit.

Premium Services

Every week or so I get an offer to try LinkedIn premium services for free. I never respond to these offers and never will.

My personal policy on LinkedIn is to accept every invite I get. Why? Because it cannot possibly hurt. Perhaps someday it helps. Perhaps not. I have a an amazingly eclectic LinkedIn group. But to communicate with anyone, you have to do it through LinkedIn unless you get their email address.

That's part of the model, but it also sucks.

Profiles

I have two profiles, one by accident. I set them up under two different email addresses, not realizing I already had a profile. I wanted to merge them, but the procedure was absurd. I do not want to delete and do a mass invite.

I just looked again tonight. They finally addressed this issue in August of last year (See Merging Accounts).

So, if you sent me an invite, and I did not respond, it is likely because you found my inactive profile to which I do not even know my password. Try again in a week or so, and hopefully I will have this fixed.

LinkedIn Mania Over?

Is the mania over? It's hard to say.

The LinkedIn business model may very well be viable, but not if it loses money, and it is struggling to make any.

Can it make enough to support a $32 billion market cap? I highly doubt it. I expect to see this company trading once again at $50. Heck, $10 would not surprise me in the least.

The thing is, stocks generally peak on good news not bad. So maybe more mania is on the way. Don't count on it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Employment Compensation Costs (Wages and Benefits) Jump in First Quarter

Posted: 30 Apr 2015 12:34 PM PDT

A BLS report out today shows Compensation Costs up 0.7% December 2014-March 2015 and 2.6% over the year ending March.

Civilian Workers

Compensation costs for civilian workers increased 0.7 percent, seasonally adjusted, for the 3-month
period ending March 2015, the U.S. Bureau of Labor Statistics reported today. Wages and salaries
(which make up about 70 percent of compensation costs) increased 0.7 percent, and benefits (which
make up the remaining 30 percent of compensation) increased 0.6 percent.

Compensation costs for civilian workers increased 2.6 percent for the 12-month period ending
March 2015, rising from the March 2014 increase in compensation costs of 1.8 percent. Wages and
salaries increased 2.6 percent for the 12-month period ending March 2015, which was higher than the
1.6-percent increase in March 2014. Benefit costs increased 2.7 percent for the 12-month period ending March 2015, compared with a 2.1-percent increase for the 12-month period ending March 2014.

Private Industry Workers

Compensation costs for private industry workers increased 2.8 percent over the year, higher than the
March 2014 increase of 1.7 percent. Wages and salaries increased 2.8 percent for the current 12-monthperiod ending March 2015, also higher than the March 2014 increase of 1.7 percent. The cost of benefits rose 2.6 percent for the 12-month period ending March 2015, which was higher than March 2014, when the increase was 1.8 percent.

Private Industry Compensation Percent Change From Year Ago

click on chart for sharper image

Private Industry Wages Percent Change From Year Ago

Employment costs have risen. Expect an even bigger jump in upcoming months now that Walmart and McDonald's voluntarily hiked wages, and some cities and states raised the minimum wage as well.

Extra money in people's pockets is a good thing, but it will hurt corporate earnings and dampen enthusiasm for hiring and adding stores.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Initial Unemployment Claims Plunge to 262,000 - Lowest Since April 2000; What's Going On?

Posted: 30 Apr 2015 10:14 AM PDT

Initial unemployment claims plunged to 262,000 today bettering the Bloomberg Consensus.

The Fed is ready now to pull the trigger at anytime and today's jobless claims data may have their finger a little itchy. Initial claims, not skewed by special factors, plunged 34,000 in the April 25 week to 262,000 which is the lowest level since all the way back to April 2000. The 4-week average is down 1,250 to a 283,750 level which is just below a month-ago and points to improvement for the April employment report.

Continuing claims, where reporting lags by a week, are also at or near 15-year lows. In data for the April 18 week, continuing claims fell 74,000 to 2.253 million with the 4-week average down 18,000 to 2.291 million. The unemployment rate for insured workers is at 1.7 percent.

The Labor Department says there are no special factors in today's report though adjusting for weekly data surrounding Easter, which fell late in April last year, is always tricky. Still, on its face, today's report speaks to solid improvement in the labor market and to a big bounce back for the April employment report.

Initial Unemployment Claims

Initial Unemployment Claims 4 Week Moving Average

Initial claims are in the basket of leading indicators. Blue boxes show four occasions where claims turned up strong and no recession occurred. Red boxes show four occasions where claims turned up and a recession followed later. The purple boxes show two occasions where claims bottomed just as recession started.

I suspect the next turn higher, whenever it occurs, is likely to be significant. There will not be much of a warning. Other data suggests a recession may have already started.

Explaining the Low Numbers

Reader Tim pinged me with this thought on the numbers.

Hello Mish

We have talked of "job growth" under Obama and how a large number of part-time jobs were created that have led to people needing more than one part-time job to make ends meet. Of course, this is a two-edged sword. You lose one part-time job, and you cannot file for unemployment because you have another part-time job!

My daughter holds three part-time jobs totaling 43 hours and is categorized as "full-time" by the BLS because she works more than 32 hours a week.

One of those jobs just ended. She will drop to 28 hours total and be classified as part-time, with no unemployment eligibility. This is another hidden Obamacare impact, and a probable reason for the huge drop in unemployment filing.

Obamacare Effect

Tim refers to the classification of a full time job as 30 hours under Obamacare. In response, many fast food and retail stores slashed worker hours to 25 or less forcing those workers to take on second jobs. This inflates the strength of the job reports and the initial unemployment claims reports as well.

Because of all the multiple part-time jobs people hold, there may not be much of a jump in claims when the recession starts. It's possible there is no jump at all, just cutbacks in hours.

For discussion of the idea a recession may have already started, please see Real Q1 GDP 0.2% vs. Consensus 1.0%; Disaster in the Details.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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