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Why LinkedIn Is Cashing In for Investors

LinkedIn (LNKD) started as just a networking tool for young, wired professionals. Now it’s a force to be reckoned with, and investors need to take notice.

While Facebook (FB) stock is down 10% year-to-date and off more than 35% from its offer price of $38 a per share one year ago, LinkedIn has been on a tear. LNKD stock has roughly doubled since its 2011 IPO, is up 70% in the last 12 months and 50%  year-to-date in 2013.

Why the big run? Well, while Facebook is struggling to find profits despite its reach, there are a host of items with growth potential in 2014 for LinkedIn. They include:

Corporate Customers: LinkedIn appeals to businesses looking to fill job openings in this digital age, with its annual report in February boasting a 78% jump in Corporate Solutions customers — that is, enterprises or professional organizations that use LinkedIn for recruiting or marketing services. This is the way modern corporations are hiring — and if you have any doubt, consider that while LNKD stock is up mightily in the last 12 months, online job board Monster Worldwide (MWW) has crashed more than 40% in the same period. Guess who’s eating their lunch by disrupting the hiring ads biz?

Publishing Efforts: With its Influencers content, LinkedIn is developing an extra layer to its business by providing professionals with career tips, news and other professional insights from thought leaders. And we’re talking big-name businesspeople, including Virgin Group founder Richard Branson, Microsoft (MSFT) founder Bill Gates and former General Electric (GE) CEO Jack Welch. According to publicly available click reporting on each article, top posts routinely exceed 100,000 views — a great stream of eyeballs for additional advertising dollars in the LinkedIn universe. Throw in the acquisition of news filterer Pulse earlier this year, and you can see that LinkedIn is serious about the content biz.

Job Market Recovery: Let’s not forget that LinkedIn has been doing brisk business even amid a downturn and reasonably high unemployment. If job openings pick up and more professionals are confident that they can find a new gig somewhere else, then LinkedIn is bound to see a lot more updated resumes and connections inquiring about job openings. That will naturally boost the bottom line for LNKD.

There are a host of other bigger-picture reasons to be bullish on LinkedIn stock, too.

They have a real CEO in Jeff Weiner, who joined LinkedIn in 2008 after serving as a vice president at Yahoo (YHOO), rather than some edgy young programmer with a mind for code but no mind for profits.

LNKD also has blown the doors off with its earnings results over the last few years, showing momentum is not slowing down. A blowout earnings report in February included an 81% jump in revenue year-over-year and profits of 35 cents per share on estimates of just 19 cents. Then in April we learned that the company nearly doubled its revenue quarter-over-quarter and more than quadrupled its profit. Clearly LNKD has not plateaued.

Given this narrative of strong leadership, great fundamentals and strong growth potential … you’d be wise to take notice of LinkedIn stock.

There are risks, surely — including a forward P/E of 80 and the frothiness of shares after the run-up; LNKD stock has been choppy but flat since April as a result of these factors.

But LinkedIn is legit, and investors should keep an eye on this fast-moving social media stock.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.

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