LinkedIn: JP Morgan Goes Back To Buy, But Mind The Float

Shares of the online professional social networking operator LinkedIn (LNKD) are up $2.84, or 4%, at $72.79 this morning after JP Morgan’s Doug Anmuth raised his rating on the shares to Overweight from Neutral, while trimming his price target from $98 to $84, writing that the return looks better after a 36% drop from the stock’s July 15th high.

LinkedIn went public on May 19th at a price of $45, soared over 100% on their first day, and then received favorable reviews from the underwriters, including JP Morgan, a month later.

However, Anmuth cut his rating to Neutral a month later, writing that the run-up in the share had made them too expensive.

Anmuth is “encouraged by the company’s growing penetration in the enterprise market,” with 7,400 customers, he writes.

The company continues to have an Ebitda margin that is in the “mid-teens” on a percentage basis and is “solid,” in his view. And he thinks the company’s business segments have operated well, with “hiring solutions,” for example, up 160%.

Anmuth raised his revenue and Ebitda estimates for this year and next. 2011 is now seen delivery $516.8 million in revenue and $86 million in Ebitda, up from a prior $488.6 million and $72.5 million. For 2012, he projects $793.1 million and $153.4 million, up from $725.4 million and $137.2 million.

However, Anmuth cut his price target because he says he now has “more conservative assumptions related to the broader Internet space,” and so he assigns a 17.5 times multiple on “terminal Ebitda,” down from what had been a 23.5 times multiple before.

Also, be mindful, he writes, of the increased float in the stock, which has more than doubled since the IPO and is set to rise again next February:

Increased liquidity around the follow-on and lock-up expiration. Through the follow-on offering, just under 10M shares came to market on November 17, including 2.4M primary shares sold by the company. On November 21, an additional 24M Class B shares were unlocked, though some are likely restricted by Rule 144/701. We note that the IPO lock-up release date was just two trading days after the follow-on pricing, which likely created additional pressure on shares. Second lock-up expiration in February. On ~February 15, an additional ~55M shares will be unlocked, some of which will be restricted. These include shares owned by LinkedIn�s largest holders Reid Hoffman (Co-Founder and Chairman) and Sequoia Capital, neither of which have sold any material number of shares on either the IPO or follow-on.