Brean Capital analyst Sarah Hindlian came out with her views on LinkedIn Corp (NYSE:LNKD), after the company announced that it has agreed to buy lynda.com, an online learning company that aims to help professionals further develop their skills, for approximately $1.5 billion in a deal comprising 52% cash and 48% stock.
Hindlian wrote, “While we believe LinkedIn has to increasingly seek/acquire new ways to monetize its relatively small but valuable user base, with industry lagging user engagement, we do consider a Learning Management System (LMS) a much better monetization solution and user engagement case than Sales Navigator. However, we await deal closure, further financial guidance, and integration before becoming incrementally more positive on the stock given this is the largest deal LinkedIn has ever undertaken, and the price tag is hefty.”
The analyst reiterated a Sell rating on the stock with a price target of $208, which reflects a potential downside of 19% from last closing price.
Axiom analyst Victor Anthony took the other route, reiterating a Buy rating on LNKD with a price target of $300 per share. The analyst stated, “The acquisition price is expensive (given no other bidders) and dilutive to margins, but LinkedIn sees Lynda.com increasing the TAM by $30B, including corporate employee education and professional certifications.
“There are natural synergies we see with a combination, both strategic and financial, and we see an easy fit within LinkedIn’s business model. On the call, LinkedIn stressed that the focus will be on maximizing longer-term value rather than near-term results. We are generally supportive of this acquisition and believe there is a compelling opportunity (i.e. cross-selling) for LinkedIn to create incremental value longer-term. Despite the high price, the acquisition is a prudent use of capital, in our view.”, the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analysts Sarah Hindlian and Victor Anthony have a total average return of 3.2% and 20.6% respectively. Hindlian has a success rate of 66.7%% and is ranked #2238 out of 3571 analysts, while Anthony has a success rate of 77.5% and is ranked #34.