DealBook: Banks Bullish on LinkedIn

LinkedIn is a long way from its first day pop, when it traded above $100 a share.

But its underwriters are feeling pretty optimistic.

In research notes released on Tuesday, JPMorgan Chase, UBS, Morgan Stanley and Bank of America Merrill Lynch all initiated bullish ratings on the professional social networking site. Amid the vote of confidence, shares of LinkedIn jumped more than 12 percent in morning trading on Tuesday.

The lead underwriter, Morgan Stanley, placed an overweight rating on LinkedIn, with an $88 price target. LinkedIn, which the firm said might become a “standard utility for H.R. recruiters,” is expected to continue to post strong revenue growth. Although Morgan Stanley said there were some risks, like competing social networks, the firm was extremely bullish.

“Every once in a while, a company comes around that transforms an industry in such a way that investors have difficulty grasping just how big it may one day become,” the note said. “We believe LinkedIn can be one of these companies.”

JPMorgan also gave LinkedIn an overweight rating and set an $85 price target.

One of its analysts, Doug Anmuth, says LinkedIn is “disrupting both the online and offline job recruitment markets, and deeper corporate penetration and increasing member engagement will drive strong results over the next few years.”

Given its leading position as a social network for professionals, he said, LinkedIn should also be able to capture a greater share of the $27 billion global market for staffing. He cautioned, however, that if economic conditions deteriorated and the job market slowed, LinkedIn could be worth $60 a share, based on a discounted cash flow valuation.

UBS weighed in with a buy rating and a more bullish $90 price target. Like its peers, UBS called LinkedIn’s business “disruptive,” and said it would most likely record “better than expected growth in the user base, with corresponding revenue outperformance.”

Rounding out LinkedIn’s top underwriters is Bank of America Merrill Lynch. The firm gave LinkedIn a buy rating and a price target of $92. Calling it a “$10 billion long-term revenue opportunity,” the bank said LinkedIn’s shares should benefit from several key drivers: strong second-quarter results, international traction and new products, which should be a bigger focus next year.

Some of the other equity research houses on Wall Street, however, have assumed a more subdued stance. Evercore Partners, which released its note earlier this month, initiated coverage with an equal-weight rating and a price target of $70, below where the shares are trading now.

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