Shares of LinkedIn Corp., the biggest professional-networking website, fell the most in three months amid a decline in other Web companies and Monster Worldwide Inc.’s report of third-quarter revenue that trailed estimates.
LinkedIn’s stock tumbled 4.8 percent to $96.35 at Thursday's close in New York, the biggest drop since Aug. 2. The S&P 500 Information Technology Index declined 1.4 percent 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 Thursday.
LinkedIn’s high valuation -- it has a price-to-earnings ratio of 134 times this year’s expected earnings -- and the company’s tendency to swing more widely than the broader market may have led to the decline, 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 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 53 percent this year. The company reported third- quarter sales 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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