February 04, 2013 at 04:00 AM EST
New Trade: Long LinkedIn ($LNKD) & Short Zillow ($Z)
After publishing my 2013 Tech Stock rankings, I’ve been able to start off the year with a few good trades. 3 out of my first 4 are profitable so far and one is above my 20% threshold which means I might close it at any point but for now, I do think there might be room for [...]

After publishing my 2013 Tech Stock rankingsI’ve been able to start off the year with a few good trades. 3 out of my first 4 are profitable so far and one is above my 20% threshold which means I might close it at any point but for now, I do think there might be room for a bit more profits. You can see live performance of those picks here:

-2013 Long & Short Tech Stock Picks

Today, I wanted to go long LinkedIn, despite the fact that it announces earnings this week, something I tend to stay away from. I looked at different alternatives and was looking for other high P/E trading stocks so Yelp ended up being a good candidate but in the end, given the explosion in “local”, I preferred going for a “safer” short. Here are the numbers for those 2 trades:

TickerNamePriceEPSPE RatioPE Next YearSales GrowthAnalyst ratingBook Value
ZZillow Inc370.05180.1980.51116.83.918.27
LNKDLinkedIn Corp123.820.15825.2794.14114.814.077.74

Long LinkedIn (LNKD)

LinkedIn nearly ranked at the top of my 2013 social web stocks rankings but being #2 to Facebook (FB), especially when you know how  bullish I am of the Mark Zuckerberg-led company.  The fact is that LinkedIn is in many ways a unique company that could go in many different directions in the next few years with very little competition.  Yes, LinkedIn trades at an incredibly high P/E which creates challenges but I feel a lot better trading it against other high P/E names as I am doing today.

lnkd

LNKD Revenue Quarterly YoY Growth Chart

LNKD Revenue Quarterly YoY Growth data by YCharts

Next earnings: February 7th

zillow_logo-300x63Short Zillow (Z)

I wrote about both Zillow (Z) and Trulia (TRLA) last October and had not been very impressed by either company. That has not changed and I simply don’t see how in the world this stock can trade at such a P/E. Earnings will not explode and there is no reason in my opinion for the stock to trade at such high prices.  Yes, revenues have increased at a solid pace but that growth is slowing down and earnings have not tracked.

z

Z Revenue Quarterly YoY Growth Chart

Z Revenue Quarterly YoY Growth data by YCharts

Next earnings:  February 13th

Disclaimer: No positions on LNKD or Z

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