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The return of the Tech Bubble
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turtle777
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May 19, 2011, 01:15 PM
 
LinkedIn IPO, more than doubled from IPO price, currently trading at more than 1,200x P/E

LNKD Bubble Update: $100 Passed... Make That $107.... $108...$110....$115...$117...$122...$115...$112 | zero hedge

WTF ? What kind of retarded people are blowing their money on 1,200 P/E ?
Absolutely baffling.

This just shows that the money from Ben's printing press needs to find some outlet.

-t
     
Dork.
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May 19, 2011, 01:25 PM
 
At least they have earnings.
     
The Final Dakar
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May 19, 2011, 01:28 PM
 
Was the first Tech Bubble the result of the Federal reserve or is this another generic slander against the government without the gratuitous "Chairsatan" title?
     
olePigeon
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May 19, 2011, 01:38 PM
 
Some should make a company called "I'm rich!" and have it IPO just to make people rich.
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turtle777  (op)
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May 19, 2011, 02:53 PM
 
Originally Posted by Dork. View Post
At least they have earnings.
Yeah, ginormous earnings, LOL.

-t
     
mattyb
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May 19, 2011, 05:05 PM
 
Bet Facebook will beat that P/E. Wonder what Google was on its first day trading.
     
Peter
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May 19, 2011, 05:12 PM
 
The opening day of an initial public offering is a really dumb time to make decisions on how what this means for a potential bubble. Come back in 90 days.
we don't have time to stop for gas
     
turtle777  (op)
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May 19, 2011, 05:21 PM
 
Originally Posted by Peter View Post
The opening day of an initial public offering is a really dumb time to make decisions on how what this means for a potential bubble. Come back in 90 days.
With all due respect, but this is BS.

At > 200x P/E, you will lose money. No maturing company will hold that high of a P/E.
At that P/E, that stock *IS* in a bubble GUARANTEED !

Of course, you might recoup your money if you just buy and then hold for 10 years, when finally, that level of stock price is reached again at an acceptable 50x P/E multiple.
Meanwhile, the stock will go down drastically, giving you much better opportunities to purchase this "story" for far less money.

Put differently: the stock will fall drastically, no question about it.

-t
     
Peter
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May 19, 2011, 05:37 PM
 
That is my point. Right now investors are going crazy because its a) a hot product, b) it's the first major internet site to IPO for a decade, c) they are looking for the next toptable - irrespective of the fact Linkedin played down their earnings and ambitions.

In 90 days the buzz will have died down. The CEO of Linkedin himself has reiterated this.
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turtle777  (op)
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May 19, 2011, 05:44 PM
 
Right. It's amazing that people haven't learned from the dotcom bubble.
Same mistakes all over again.

Ah well, there's a sucker born every minute.

-t
     
Peter
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May 19, 2011, 05:55 PM
 
Tons of companies have gone public with minimal profits, or even huge losses and turned into huge companies.

Amazon went public in 1997 and had revenues of ~$100M, and didn't get to profitability until 2001
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turtle777  (op)
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May 19, 2011, 06:36 PM
 
Originally Posted by Peter View Post
Tons of companies have gone public with minimal profits, or even huge losses and turned into huge companies.

Amazon went public in 1997 and had revenues of ~$100M, and didn't get to profitability until 2001
Yes, but if there is no earnings, you use a Sales multiple.
LinkedIn was at >20, quite high.
Amazon was in that range, too, and is one of the very few that actually worked out. Most stocks with that high multiples never delivered.

Compare this to Google:
At IPO 2004, Sales were $ 1B, Earnings $107M in 2003.
IPO market cap $ 23B. That's a modest P/E of 214 compared to LinkedIn of over 1,000.

Plus, let's be honest - Amazon and Google had a business model that was much more "tangible" than a social networking site like LinkedIn.

-t
     
Lateralus
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May 19, 2011, 06:46 PM
 
Originally Posted by turtle777 View Post
Plus, let's be honest - Amazon and Google had a business model that was much more "tangible" than a social networking site like LinkedIn.

-t
And that's the important bit, I think. The tech bubble was defined by companies who were valued stratospherically in spite of the fact that they had no real revenue model, or at least one that was either not sustainable or incredibly fickle.

LinkedIn qualifies as such a company.
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Peter
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May 19, 2011, 06:55 PM
 
I'd put money on LinkedIn having revenues of billions within 4 years.

LinkedIn has decent revenue growth (and is betting heavily on R&D) during a recession. Guys, this is a site whose customer is recruitment. Think about that in 3 years when employment is rocking again (hopefully.)

My location presumably explains my optimism though!
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turtle777  (op)
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May 19, 2011, 07:54 PM
 
Originally Posted by Peter View Post
I'd put money on LinkedIn having revenues of billions within 4 years.
Revenues from what ? Who will pay that much money ?

-t
     
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May 19, 2011, 09:06 PM
 
Now that they're a public company, Facebook will announce a FB Business Edition, tank the Linked In stock, and snap up the company for pennies, all without actually needing to release FB BE.
     
turtle777  (op)
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May 19, 2011, 09:12 PM
 
That's one of the weaknesses of social networking sites in general: nothing is unique, it can all be replicated.

-t
     
Brien
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May 19, 2011, 09:56 PM
 
I don't think MySpace, Friendster, Xanga, or Livejournal like that kind of thinking there turtle...
     
turtle777  (op)
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May 19, 2011, 10:01 PM
 


-t
     
ghporter
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May 19, 2011, 10:14 PM
 
Originally Posted by The Final Dakar View Post
Was the first Tech Bubble the result of the Federal reserve or is this another generic slander against the government without the gratuitous "Chairsatan" title?
The first bubble was because people who wouldn't touch a computer "heard that tech was going places," and invested in ideas that were based on smoke and mirrors, or on really, really sincere hopes. A lot of real companies didn't get funded during the bubble run up because they actually had business plans with income and timelines-they just didn't sound "different" enough.

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besson3c
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May 19, 2011, 10:31 PM
 
Originally Posted by turtle777 View Post
Revenues from what ? Who will pay that much money ?

-t

There are a lot of head hunters relying on Linkedin now... I had a woman from Barnes and Noble that wanted to interview me recently having seen my Linkedin profile. As such, there is a lot of data here to track to better understand a demographic. I don't see why Linkedin couldn't do pretty much what Facebook has done, except in the business world as its focal point.
     
turtle777  (op)
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May 19, 2011, 10:35 PM
 
Originally Posted by besson3c View Post
There are a lot of head hunters relying on Linkedin now... I had a woman from Barnes and Noble that wanted to interview me recently having seen my Linkedin profile. As such, there is a lot of data here to track to better understand a demographic. I don't see why Linkedin couldn't do pretty much what Facebook has done, except in the business world as its focal point.
That's not an answer.

They use it because it's free. They wouldn't use it at a cost. Monster is free.
And for the "premium" recruiting market, the is theladders.com.

-t
     
besson3c
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May 19, 2011, 10:46 PM
 
Originally Posted by turtle777 View Post
That's not an answer.

They use it because it's free. They wouldn't use it at a cost. Monster is free.
And for the "premium" recruiting market, the is theladders.com.

-t

If a company like Barnes and Noble thinks that Linkedin is an effective recruitment tool, it doesn't really matter whether it's free or not, it's an effective recruitment tool, and therefore it has value to them.
     
turtle777  (op)
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May 19, 2011, 11:19 PM
 
Originally Posted by besson3c View Post
If a company like Barnes and Noble thinks that Linkedin is an effective recruitment tool, it doesn't really matter whether it's free or not, it's an effective recruitment tool, and therefore it has value to them.
Barnes and Noble is bankrupt, what's your point ?

Besides, I'm not arguing that they won't pay *any* money.
I'm just questioning the *Billions* of $$$.

-t
     
besson3c
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May 19, 2011, 11:25 PM
 
Originally Posted by turtle777 View Post
Barnes and Noble is bankrupt, what's your point ?

Besides, I'm not arguing that they won't pay *any* money.
I'm just questioning the *Billions* of $$$.

-t

I have no way of attaching a dollar figure to the value of Linkedin, I was just trying to explain what the value of Linkedin might be in the eyes of these investors.
     
Eug
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May 19, 2011, 11:36 PM
 
Interesting I found this thread here. As soon as I heard the IPO news, the first thing I thought was dotcom bubble too.

PS. I refuse all requests to be linked to other LinkedIn people. But then again what do I know... I don't have a Facebook acct either.


Originally Posted by besson3c View Post
I have no way of attaching a dollar figure to the value of Linkedin, I was just trying to explain what the value of Linkedin might be in the eyes of these investors.
I wonder if some of them are the same people who thought Carly Fiorina was worth tens of millions.
     
Peter
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May 20, 2011, 04:58 AM
 
Originally Posted by turtle777 View Post
Revenues from what ? Who will pay that much money ?

-t
Headhunters and anyone in the recruitment business can and will.

LinkedIn has loads of avenues to monetize.
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Peter
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May 20, 2011, 05:01 AM
 
Originally Posted by ghporter View Post
The first bubble was because people who wouldn't touch a computer "heard that tech was going places," and invested in ideas that were based on smoke and mirrors, or on really, really sincere hopes. A lot of real companies didn't get funded during the bubble run up because they actually had business plans with income and timelines-they just didn't sound "different" enough.
This. The first bubble was ridiculous, hell, companies were getting higher valuations purely because they had .com in their name - this is not a bubble, for one thing, the majority of these companies have either a) strong traction, or b) revenues!

People love to say there is a bubble when they look at Twitter, Groupon, Zynga, Facebook, LinkedIn, Gilt, Yelp, and so on - but all of the late stage companies gearing up for initial public offerings are making strong revenues that are growing year on year. Huge difference to last bubble where companies had 0 revenues.
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Eug
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May 20, 2011, 06:38 AM
 
"It's different this time because…"

Sure, maybe the last bubble is the mother of all bubbles, but P/E ratios of ~1000 certainly don't bode well. Remember they're now valued at around $9 billion, but only made about $9 million in profit last year.
     
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May 20, 2011, 06:58 AM
 
Originally Posted by turtle777 View Post
That's not an answer.

They use it because it's free. They wouldn't use it at a cost. Monster is free.
And for the "premium" recruiting market, the is theladders.com.

-t
Linkedin certainly does charge recruiters and companies who post jobs for some services. I know they charge recruiters for the privilege of seeing the stuff in your LinkedIn account even if they aren't your "friend".
My company has put several jobs out there recently, and our HR person says that the quality of resumes they get out of LinkedIn is much better than from Monster or other avenues. (They are more likely to be local / not requiring relocation, too.)

Plus, we know there' money to be made in a "premium" recruiting market : no less an authority than turtle777 said so in his latest investment newsletter/post. Whether or not LinkedIn can capture enough of that money to justify their eleventy-billion dollar valuation remains to be seen. I wouldn't bet on it, though.
     
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May 20, 2011, 07:56 AM
 
AFAIK, Monster isn't free for recruiters.

I know consultants who really keep up with their LinkedIn stuff, and they get new contacts and new work through LinkedIn. I know others who have 500 contacts just to show that they have 500 contacts. When I'm looking for a job, I prefer to use Monster type sites or to send my CV to specific offers, LinkedIn has maybe 10% of the offers that I see on other job sites.
     
ghporter
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May 20, 2011, 08:11 AM
 
Originally Posted by turtle777 View Post
Barnes and Noble is bankrupt, what's your point ?

Besides, I'm not arguing that they won't pay *any* money.
I'm just questioning the *Billions* of $$$.

-t
No, Borders is bankrupt. Barnes and Noble is alive and well-because they latched onto digital sales and later digital media at the right time. They were behind Amazon (remember when Amazon was only an online book seller?) but quite soon after them, and thus they were on track and built their reputation and experience early and well. Borders was late to the game, depended on others (specifically Amazon) for their online sales channel, and basically botched the whole digital market.

Monster, Career Builder, and other job/résumé sites charge recruiters for leads, just like brick and mortar job placement firms. They charge less than "traditional" placement services, and get a much wider pool of hopefuls, making them effective and affordable. They have managed to take a traditional business model and transition it to digital smoothly and well.

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turtle777  (op)
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May 20, 2011, 10:00 AM
 
Originally Posted by ghporter View Post
No, Borders is bankrupt. Barnes and Noble is alive and well-because they latched onto digital sales and later digital media at the right time.
Oops, you're right. Borders is bankrupt, B&N is not. Yet

Have a look at the B&N Bankruptcy Index:

Eco-Libris | Barnes and Noble Bankruptcy Index

-t
     
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May 20, 2011, 11:24 AM
 
The tech bubble is bigger than ever. It's not just the Web but Apps too. Colors, Flipboard, others. Lots with 0 revenues with 10s of millions of dollars in valuations and funding. That is, massive valuations far greater than several years worth of projected operating income or ones with no clear way of making real money.
     
turtle777  (op)
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May 20, 2011, 12:06 PM
 
Interesting interview: 'LinkedIn Has the Highest Price-Revenue Ratio of Any Stock Anywhere' - Derek Thompson - Business - The Atlantic

In LinkedIn's defense, the "hiring solutions" market is enormous. One analyst pegged it at $30 billion, which makes it bigger than the U.S. beer industry, for example. That implies lots of room for growth.
Well, so given that LinkedIn's valaution right now implies a market cap of $9B, they will have to grab a HUGE chunk of that "hiring solutions" market.

Color me skeptical.

-t
     
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May 20, 2011, 12:44 PM
 
Originally Posted by turtle777 View Post
That's one of the weaknesses of social networking sites in general: nothing is unique, it can all be replicated.

-t
That's not really the case - you might as well say that's a weakness of the car industry, everything can be replicated. Facebook didn't replace MySpace because the market was fickle, it replaced it because FB is a much better run company, with a defined vision.

LinkedIn stock will stay overvalued for a very simple reason - only a very small percentage is available to the public and scarcity pushes up prices. Otherwise, yes I 100% agree, there's a huge bubble.
     
turtle777  (op)
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May 20, 2011, 01:25 PM
 
Originally Posted by Phileas View Post
That's not really the case - you might as well say that's a weakness of the car industry, everything can be replicated.
LOL, you just confirmed my point.

That's EXACTLY the reason why car companies are valued at 5-10x P/E.

Even Apple (with unique products that can' be easily replicated) is at 16 P/E.

-t
     
Lateralus
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May 20, 2011, 05:05 PM
 
LinkedIn Corp: NYSE:LNKD quotes & news - Google Finance

Looks like reality has set in - down around 25% from yesterday's high.
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May 20, 2011, 05:12 PM
 
Originally Posted by Lateralus View Post
LinkedIn Corp: NYSE:LNKD quotes & news - Google Finance

Looks like reality has set in - down around 25% from yesterday's high.
Well, it closed at only $1.16 down from yesterday's close. That's a drop of all of 1.23%... which isn't that much more than the market at large today.
     
Lateralus
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May 20, 2011, 05:35 PM
 
Yes, which is why I specifically referenced yesterday's intraday high - which a lot of people bought at or around. Anybody who bought midday yesterday is down 10-15% right now.
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