LinkedIn Corp. (LNKD:US), the biggest professional-networking website, fell the most in three months amid a decline in other Web companies and Monster Worldwide Inc. (MWW:US)’s report of third-quarter revenue that trailed estimates.
LinkedIn’s stock tumbled 4.8 percent to $96.35 at the close in New York, the biggest drop (LNKD:US) since Aug. 2. The S&P 500 Information Technology Index declined 1.4 percent today to its lowest level since July 12. Shares of Internet stocks fared poorly; OpenTable Inc., Shutterfly Inc., Yelp Inc., Trulia Inc. and Zillow Inc. all lost ground today.
LinkedIn’s high (LNDK:US) valuation -- it has a price-to-earnings ratio of 134 times this year’s expected earnings -- and the company’s tendency to swing (LNKD:US) more widely than the broader market may have led to the decline (LNKD:US), said Bill Sutherland, an analyst at Northland Securities Inc., which is based in Minneapolis.
“It’s a tug-of-war in this stock between the valuation and the perceived level of growth,” said Sutherland, who has an outperform (LNKD:US) rating on the shares.
Investors believe LinkedIn’s fundamental performance is sound and may be “locking in their gains,” he said. The shares have risen (LNKD:US) 53 percent this year. The company reported third- quarter sales (LNKD:US) on Nov. 1 that topped analysts’ estimates as it sold more subscriptions to its expanding customer base.
Morgan Stanley earlier reported a 3.9 percent passive stake in Mountain View, California-based LinkedIn.
Monster Worldwide, the Internet recruiting service exploring a sale, reported third-quarter sales that declined and missed analysts’ estimates. The stock rose the most in almost six months an an intraday basis after the company said it will seek a buyer for its ChinaHR unit and restructure to sell less lucrative businesses.
“Monster reported today and had their usual mixed bag,” said Sutherland. “It’s just been a bad week for high multiple, high-beta stocks.”
LinkedIn’s shares are also reacting to a broader selloff in Internet stocks that may be fueled by Wall Street’s reaction to President Barack Obama’s re-election and a bearish outlook on European sales, said Aaron Kessler, an analyst at Raymond James & Associates in San Francisco. He has a market perform rating on the shares.
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