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LinkedIn Earnings Could Push the Social Stock Higher

LinkedIn (LNKD) reports earnings in about a week, and when it does, investors could see some big numbers that push the stock higher.

That’s saying something, considering the 70% run for LinkedIn stock year-to-date — but completely possible thanks to the big momentum behind the social media stock right now.

The biggest reason for optimism is that LNKD in is not a social media fad like Facebook (FB), where fickle users and display advertising are what move the needle. Instead, LinkedIn is reliant on professionals and corporate customers who are willing to pay a fee to participate in the LNKD ecosystem — either to find a job, to network or to seek professional development.

Consider that LinkedIn’s annual report in February revealed a 78% jump in Corporate Solutions customers across 2012. That should be all the evidence you need that LNKD is different than Zuckerberg’s social media empire; As Facebook is struggling to find profits a thanks to the pressure of mobile devices, businesses are flocking to LinkedIn for recruiting or marketing services.

The two businesses couldn’t be more different.

Furthermore, the highly competitive job market and slowly mending economy provides a secular tailwind for LinkedIn stock. It used to be that people would look at the “want ads” in the newspaper. HotJobs — now owned by Yahoo (YHOO), and Monster Worldwide (MWW) — used to be the go-to outlets for job seekers … but now it’s LinkedIn that is going to rake in bigger fees as more ads get posted by corporations looking to hire.

There are obvious risks to buying LinkedIn stock before earnings, of course. Last quarter, LinkedIn earnings blew the doors off, with the company posting double the revenue and quadruple the profit. Yet that still couldn’t stop LNKD from pulling back, thanks to very high expectations and lot of that success baked into shares. In just a few days, LinkedIn stock declined from over $200 to about $175 for a roughly 13% decline after earnings.

LNKD has since clawed its way back around the $200 mark, and after a 70%-plus run year-to-date and a 340% leap from its 2011 IPO at $45 a share, it could be due for another pullback.

But don’t count out LinkedIn.

The market for the “talent solutions” arm of LinkedIn is huge, and the company has a lot of growth potential outside the U.S. A recent note from Credit Suisse to clients pegs the global addressable market at something like $87 billion, of which 15% is strictly online — and that percentage is likely to grow substantially over time.

And when it comes to “corporate solutions” like marketing, LinkedIn has only about 18,000 corporate customers — with Credit Suisse estimating some 745,000 companies worldwide as potential clients since they have 100 or more employees. That’s a roughly 2.4% market penetration now, with considerable upside.

Even if LinkedIn earnings are not be precisely what Wall street is looking for, this long-term growth story cannot be overlooked. And considering the snap-back form LinkedIn’s earnings miss three months ago, investors can have confidence in LNKD stock going forward, whatever the upcoming earnings bring.

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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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