Post on 14-Feb-2017
Date: 03/31/2016
Hugo CastalanCity University of New York – Baruch Collegehugocastalan@gmail.com
Equity Research Report LinkedIn Corp.
Company Description• Online professional network founded in 2002.• Approximately 414 million members across 200 countries as of
February 2016.
• Free solutions: members are able to create, manage and share their professional identities. They can also stay informed and connected with other members or organizations.
• Sources of revenue:• Talent Solutions: hiring tool for companies and learning products
for customers.• Marketing Solutions: enable enterprises and individuals the ability
to advertise to its member base.• Premium Subscription: help members and enterprises to grow
their network, manage their identity, access to insightful information, and connect with talents.
Management Overview
Reid HoffmanCo-Founder and Chairman
• Board member during the creation of PayPal, and became COO in 2000.
• Was CEO of LinkedIn before becoming chairman and President in 2007.
• Known as one of Silicon Valley’s most prolific investors. Current and part investments include: Facebook, Airbnb, and Coupon.com.
Jeffrey WeinerCEO and Director
• Spent 7 years at Yahoo where he became EVP of the Network Division.
• Became CEO of LinkedIn and director of the Board in 2009.
• Also a member of the Board of Directors at Intuit Inc., which develops financial and tax preparation software for small businesses.
Steven SordelloCFO and Senior VP
• Previously served as CFO at TiVo Inc. and IAC Search & Media Inc.
• Was Director of Financial Planning of Adobe Inc. and held senior positions at Adobe System Inc. and Syntex Corp.
• Became CFO at LinkedIn in 2007 and Senior Vice President in 2011
• Currently a member of the Board of Directors at Cloudera Inc.
Products Overview
63%19%
18%Product Segmentation Talent Solutions: hiring and learning productsMarketing Solutions: advertising optionsPremium Subscriptions: offers additional fea-tures
57%28%
9%6%
Geographic SegmentationUSAEMEAAPACOthers
SWOT Analysis
Strengths:
• First mover advantage.• Users (400 million).• Three different streams of revenue.• Operating in over 200 countries.
Weaknesses:
• Low user engagement on the platform.
• Heavy dependency on online recruiting for income.
• Communication platform.
• Growing job market in emerging countries.
• Acquisition of online service Lynda.com.
• Opportunities:
• Other social networks with strong database.
• Fake accounts and hacking instances.• Dependent on the job market.
Threats:
LinkedIn Corp.
Number of Unique Visiting Members (mm)
Q1 '12
Q2 '12
Q3 '12
Q4 '12
Q1 '13
Q2 '13
Q3 '13
Q4 '13
Q1 '14
Q2 '14
Q3 '14
Q4 '14
Q1 '15
Q2 '15
Q3 '15
Q4 '15
0
20
40
60
80
100
120
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0
50
100
150
200
250
300
350
400
450
Number of Members since Creation (mm)
Acquisition of Lynda.com (2Q 2015)Lynda.com:• Founded in 1995.• Online learning
company teaching business, technology and creative skills.
• Learning solutions: business, academic and government.
• 4,606 courses taught by industry experts. Over 250,000 video tutorials.
• Available in English, German, French, Japanese, and Spanish.
The deal:• Announced April 9,
2015.• Acquisition price: $1.5
billion.• 52% cash; 48% stock.
Opportunities:• LinkedIn aims to
connect people with job opportunities. Lynda.com aims to connect people with an education for those jobs.
• Integration of tutorials to increase users’ time spent, frequency and engagement on LinkedIn.
• Possibility for recruiters to target users who have completed specific training.
Challenges:• Adapt existing learning
solutions to Lynda’s products.
• Close skills gap using the existing database to match job candidates to related online courses.
Current Situation
Global
Environment
After announcing four interest hikes for 2016, the Fed seems more likely to raise interest rates only twice this year. Indeed, questions concerning the global economic growth, as well as unconvincing data about the US economy, pushed policymakers and investors to reconsider their strategy at the start of 2016. The S&P500 was down 5.07% and 0.41% in January and February. It rebounded in March (+4.11%) as investors regained confidence in the strength of the US economy. Growth is expected to be slow in 2016 as weaker economies around the globe prevent the Fed from taking serious actions, and volatile energy price maintain a considerable level of uncertainty.
Earnings
Performanc
e
Since FY2014 Q1, LinkedIn delivered a series of negative EPS. It recorded a slightly positive EPS on FY2014 Q4 ($0.02). Since then EPS sank deeper, going as low as negative $0.53 on FY2015 Q2. Total EPS for FY2015 was -$1.29. LinkedIn excepts 2016 revenues and EPS of $3.6B-$3.65B, and $3.05-$3.20 respectively.
Recent
Pullback
On February 4th, LinkedIn topped expectation on earnings and estimates for FY2015 Q4, but announced weak guidance. Weiner said to expect Q1 revenue of $820M ($866.7 consensus), 2016 revenue of $3.6B-$3.65B ($3.91B consensus), and 2016 EPS of $3.05-$3.20 ($3.67 consensus). As a result, the stock slid more than 40%, losing $1billion in market value.
Finance and Trading Summary
Trading InformationLast Price: 115.63
52 week High/Low: 266.53/ 98.2552 week range: -53.62%
Beta: 1.5250-Days MA: 114.19
200-Days MA: 187.97
Valuation MeasuresMarket Cap 15.27B
P/E NMP/B 3.38P/S 5.05
EV/EBITDA 52.84EV/Revenue 4.33
Financial HighlightsEV/EBITDA 52.84
Profit Margin -5.56%Operating Margin -4.07Return on Assets -1.22%Return on Equity -4.21%
Revenue per Share 23.18Diluted EPS -1.29
Cash per Share 23.62Total Debt/Equity 25.06
Current Ratio 3.31Book Value Per
Share 33.84
Annotated Stock Chart
Earnings 15Q4Beat EstimatesLow Guidance
Earnings 15Q1Beat EstimatesLow Guidance
Earnings 14Q4Beat Estimates Earnings
15Q4Beat EstimatesHigh Guidance
Earnings 14Q2Beat Estimates
Earnings 15Q2Beat EstimatesHigh Guidance Settles class action lawsuit for
$13M: repeatedly sending email to users with suggestion to add people who didn’t approve those emails
Files a shelf registration in the amount of $683.15 million
Comparable Companies Analysis
LinkedIn Inc.
Monster Worldwide
Inc.
Facebook Inc.
Twitter Inc.
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0xP/B - MRQ
Business Oriented Social Network Companies
Other Social Net-work Companies
LinkedIn Inc.
Monster Worldwide
Inc.
Facebook Inc.
Twitter Inc. (35.0x)
(25.0x)
(15.0x)
(5.0x)
5.0x
15.0x
25.0x
35.0x
45.0x
55.0x
EV / Revenues EV / EBITDA
Other Social Net-work Companies
Business Oriented Social Network Companies
LinkedIn Corp.LinkedIn Corp.
Comparable Companies Analysis (cont.)
2015 2016 2017 2018-5%15%35%55%75%95%
115%135%155%
Accumulated Revenue Growth
LinkedIn Corp. Monster Worldwide, Inc. Twitter, Inc. Facebook, Inc.
LinkedIn Corp.
Monster Worldwide, Inc.
Facebook, Inc.
Twitter, Inc.
-30% -20% -10% 0% 10% 20% 30%
-5.55%
11.04%
20.57%
-23.49%
Net Profit Ratio
Business Oriented Social Network Companies
Other Social Network Companies
2-year Performance
3/31/1
45/1
/146/1
/147/1
/148/1
/149/1
/14
10/1/
14
11/1/
14
12/1/
141/1
/152/1
/153/1
/154/1
/155/1
/156/1
/157/1
/158/1
/159/1
/15
10/1/
15
11/1/
15
12/1/
151/1
/162/1
/163/1
/16 20
40
60
80
100
120
140
160
S&P 500 Internet Software and Services Index LinkedIn Inc Monster Worldwide Inc
%
LinkedIn Corp.
2-year Performance (cont.)
3/31/1
45/1
/146/1
/147/1
/148/1
/149/1
/14
10/1/
14
11/1/
14
12/1/
141/1
/152/1
/153/1
/154/1
/155/1
/156/1
/157/1
/158/1
/159/1
/15
10/1/
15
11/1/
15
12/1/
151/1
/162/1
/163/1
/16 20
40
60
80
100
120
140
160
180
200
LinkedIn Corp S&P 500 Facebook Inc Twitter Inc
%
Discounted Cash Flow Analysis Actual Projected Forecast
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
$mm $mm $mm $mm $mm $mm
Total Revenue 2,990.91 3,674.88 4,416.53 5,281.73 6,156.06 7,148.53
EBITDA 893.96 449.14 811.24 1,125.45 1,020.11 1,130.60
EBIT (121.80) (193.46) (32.36) 201.46 558.50 919.41
Tax Rate 37.50% 37.50% 37.50% 37.50% 37.50% 37.50%
EBIAT (76.13) (120.91) (20.23) 125.91 349.06 574.63
Depreciation & Amortization 420.47 568.68 614.59 723.74 733.85 795.26
Change in Working Capital (168.40) 20.06 (99.07) (110.32) (67.85) (102.27)
Capital Expenditures (507.25) (639.69) (714.75) (766.79) (791.70) (839.66)
Unlevered Free Cash Flow (UFCF) 5.50 (211.98) (21.32) 193.19 $359.06 632.51
Discount Rate (WACC) 8.03% 8.03% 8.03% 8.03% 8.03%
Present Value of Future Cash Flows 5.50 $(196.22) $(18.27) $153.23 $263.61 $429.83
Sum of Present Value of Projected UFCF 632.18
Discounted Cash Flow Analysis (cont.)EV/EBITDA
12.78 14.28 15.77 17.28 17.28
WACC
7.93% $110.26 $122.16 $134.06 $145.95 $145.95
7.98% $110.22 $122.11 $134.00 $145.89 $145.89
8.03% $110.17 $122.05 $133.94 $145.83 $145.83
8.08% $110.12 $122.00 $133.88 $145.76 $145.76
8.13% $110.08 $121.95 $133.82 $145.70 $145.70
Mean $131.56
Median $133.94
High $145.95
Low $110.08
Long-Term Growth Rate
3.70% 3.85% 4.00% 4.15% 4.30%
WACC
7.93% $117.65 $121.80 $126.28 $131.11 $136.34
7.98% $116.33 $120.39 $124.75 $129.46 $134.55
8.03% $115.04 $119.00 $123.26 $127.85 $132.81
8.08% $113.78 $117.65 $121.81 $126.28 $131.12
8.13% $112.55 $116.33 $120.39 $124.76 $129.47
Mean $123.63
Median $123.26
High $136.34
Low $112.55
Price Target RangesP/B implied
$80 $90 $100 $110 $120 $130 $140 $150 $160 $170 $180 $190 $200 $210 $220
Current $115.63
Mean $145.15
ConclusionLinkedIn is the uncontested leader in the online professional network sector. The number of users grew exponentially over the years, but the overall user engagement stays low. The acquisition of Lynda.com offers interesting opportunities as it will improve the learning solution, which, combined with the hiring solution, represents 63% of sales. The evolution of job markets in emerging countries will benefit LinkedIn (only 85% of revenues comes form USA and EMEA).
Recent results show signs of weakness. LinkedIn failed to engage its members on their platform. Most users use the free version, judging the premium version is not worth it. For a long time, trading multiples suggested outstanding growth ahead for LinkedIn. The company was not able to deliver the expected results and investors changed their mind in February 2016. A 40% pull back from almost $200 to a $115 range is excessive.
Recommendation: BUY Price Target: $145.15
APPENDIX
Number of users since creation (slide 6):Source: https://ourstory.linkedin.com/#year-2014http://expandedramblings.com/index.php/by-the-numbers-a-few-important-linkedin-stats/February 2016
Years Users #2003 0.000012004 0.12005 1.62006 4.22007 82008 172009 322010 562011 1202012 1502013 2772014 3322015 414
Number of Unique Visiting Members (mm) (Slide 6):Source: http://www.statista.com/statistics/274052/number-of-unique-visitors-to-linkedin/February 2016
Quarter Unique VisitorsQ1 '12 50Q2 '12 51Q3 '12 52Q4 '12 58Q1 '13 65Q2 '13 75Q3 '13 78Q4 '13 76Q1 '14 82Q2 '14 84Q3 '14 90Q4 '14 93Q1 '15 97Q2 '15 97Q3 '15 100Q4 '15 100
Geographic Segmentation (Slide 4):Source: Bloomberg Pro3/31/2016
Locations Sales (mm)USA 1,500
EMEA 730.24APAC 246.88
Others 167.98
Sources of Revenue Revenues
Talent Solutions: hiring and learning
products0.628
Marketing Solutions: advertising options 0.194
Premium Subscriptions: offers additional features
0.178
Product Segmentation (Slide 4):Source: Bloomberg Pro3/31/2015
Finance and Trading Summary (Slide 9):Source: Yahoo Financehttp://finance.yahoo.com/q/ks?s=LNKD+Key+Statistics
Additional Financial Statements:
S&P Capital IQ
Income Statement (Slide 20)Balance Sheet (Slide 21)Cash Flow Statement (Slide 22)
Income Statement
For the Fiscal Period Ending12 months
Dec-31-2010
12 monthsDec-31-
2011
12 monthsDec-31-
2012
12 monthsDec-31-
2013
12 monthsDec-31-
2014
12 monthsDec-31-
2015 Revenue 243.1 522.2 972.3 1,528.5 2,218.8 2,990.9 Other Revenue - - - - - - Total Revenue 243.1 522.2 972.3 1,528.5 2,218.8 2,990.9
Cost Of Goods Sold 44.8 81.4 125.5 202.9 293.8 418.9 Gross Profit 198.3 440.7 846.8 1,325.6 1,925.0 2,572.1
Selling General & Admin Exp. 94.0 239.6 452.9 747.7 1,115.7 1,497.8 R & D Exp. 65.1 132.2 257.2 395.6 536.2 775.7 Depreciation & Amort. 19.6 43.1 79.8 134.5 236.9 420.5 Other Operating Expense/(Income) - - - - - -
Other Operating Exp., Total 178.7 414.9 789.9 1,277.8 1,888.8 2,693.9
Operating Income 19.6 25.8 56.9 47.8 36.1 (121.8)
Interest Expense - - - - (6.8) (50.9) Interest and Invest. Income 0.1 0.2 1.0 2.9 5.0 10.6 Net Interest Exp. 0.1 0.2 1.0 2.9 (1.8) (40.3)
Currency Exchange Gains (Loss) (0.4) (3.0) (0.7) (1.6) (3.3) (15.0) Other Non-Operating Inc. (Exp.) (0.3) (0.1) (0.2) 0.0 0.1 (8.5) EBT Excl. Unusual Items 19.0 22.9 57.1 49.1 31.1 (185.7)
Merger & Related Restruct. Charges - - - - - (29.1) Impairment of Goodwill - - - - - -Gain (Loss) On Sale Of Invest. - 0.0 0.1 0.1 0.1 0.1 Other Unusual Items - - - - - - EBT Incl. Unusual Items 19.0 22.9 57.1 49.2 31.2 (214.7)
Income Tax Expense 3.6 11.0 35.5 22.5 46.5 (50.0) Earnings from Cont. Ops. 15.4 11.9 21.6 26.8 (15.3) (164.8)
Earnings of Discontinued Ops. - - - - - -Extraord. Item & Account. Change - - - - - - Net Income to Company 15.4 11.9 21.6 26.8 (15.3) (164.8)
Minority Int. in Earnings - - - - (0.4) (1.4) Net Income 15.4 11.9 21.6 26.8 (15.7) (166.1)
Balance SheetBalance Sheet as of: Dec-31-
2010Dec-31-
2011Dec-31-
2012Dec-31-
2013Dec-31-
2014Dec-31-
2015ASSETSCash And Equivalents 93.0 339.0 270.4 803.1 460.9 546.2 Short Term Investments - 238.5 479.1 1,526.2 2,982.4 2,573.1 Total Cash & ST Investments 93.0 577.5 749.5 2,329.3 3,443.3 3,119.4
Accounts Receivable 58.3 111.4 203.6 302.2 449.0 603.1 Total Receivables 58.3 111.4 203.6 302.2 449.0 603.1
Prepaid Exp. 4.9 10.8 14.3 32.1 53.0 63.0 Other Current Assets 16.1 26.3 51.3 91.9 176.8 149.7 Total Current Assets 172.2 725.9 1,018.8 2,755.5 4,122.1 3,935.1
Gross Property, Plant & Equipment
95.1 192.3 328.3 605.4 1,147.4 1,709.3
Accumulated Depreciation (38.4) (77.4) (141.7) (243.7) (406.5) (662.3) Net Property, Plant & Equipment
56.7 114.9 186.7 361.7 740.9 1,047.0
Goodwill - 12.2 115.2 150.9 356.7 1,507.1 Other Intangibles 5.2 8.1 32.8 43.0 131.3 373.1 Deferred Charges, LT 1.7 - - - - -Other Long-Term Assets 2.3 12.6 28.9 41.7 76.3 148.9 Total Assets 238.2 873.7 1,382.3 3,352.8 5,427.3 7,011.2
LIABILITIESAccounts Payable 12.9 28.2 53.6 66.7 100.3 162.2 Accrued Exp. 27.6 58.6 104.1 183.0 260.2 316.8 Unearned Revenue, Current 65.0 139.8 257.7 392.2 522.3 709.1 Other Current Liabilities - - - - - - Total Current Liabilities 105.5 226.7 415.4 642.0 882.8 1,188.1
Long-Term Debt - - - - 1,081.6 1,126.5 Def. Tax Liability, Non-Curr. 6.6 18.6 27.7 14.9 - -Other Non-Current Liabilities
1.9 3.5 30.8 61.5 132.1 201.1
Total Liabilities 114.0 248.7 473.9 718.4 2,096.4 2,515.7
Pref. Stock, Convertible 103.8 - - - - - Total Pref. Equity 103.8 - - - - -
Common Stock 0.0 0.0 0.0 0.0 0.0 0.0 Additional Paid In Capital 25.1 617.6 879.3 2,573.4 3,285.7 4,588.6 Retained Earnings (4.7) 7.2 28.9 55.6 39.9 (129.1) Treasury Stock - - - - - -Comprehensive Inc. and Other
0 0.1 0.3 0.3 (0.2) 9.1
Total Common Equity 20.4 625.0 908.4 2,629.4 3,325.4 4,468.6
Minority Interest - - - 5.0 5.4 26.8
Total Equity 124.2 625.0 908.4 2,634.4 3,330.8 4,495.5
Total Liabilities And Equity 238.2 873.7 1,382.3 3,352.8 5,427.3 7,011.2
Cash Flow
For the Fiscal Period Ending
12 monthsDec-31-
2010
12 monthsDec-31-
2011
12 monthsDec-31-
2012
12 monthsDec-31-
2013
12 monthsDec-31-
2014
12 monthsDec-31-
2015 Net Income 15.4 11.9 21.6 26.8 (15.7) (166.1) Depreciation & Amort. 15.7 34.1 58.7 102.5 161.6 234.0 Amort. of Goodwill and Intangibles
1.0 3.6 9.9 16.4 34.6 134.7
Depreciation & Amort., Total 16.7 37.7 68.6 118.9 196.2 368.7
Other Amortization 2.9 5.4 11.2 15.6 46.6 97.4 (Gain) Loss On Sale Of Invest. - - 5.3 8.3 13.6 20.3 Stock-Based Compensation 8.8 29.8 86.3 193.9 319.1 510.3 Tax Benefit from Stock Options (0.1) (1.6) (35.8) (43.8) (99.2) (12.2) Provision & Write-off of Bad debts
1.8 3.1 0.6 4.8 11.3 12.7
Other Operating Activities - - - - 0.4 1.4 Change in Acc. Receivable (35.7) (54.9) (91.3) (102.6) (137.6) (149.5) Change in Acc. Payable 15.6 37.0 85.6 114.7 150.0 100.9 Change in Unearned Rev. 39.5 74.8 117.9 134.5 129.3 144.0 Change in Inc. Taxes (0.5) 9.7 27.1 3.1 19.3 (36.3) Change in Other Net Operating Assets
(10.1) (19.4) (30.1) (37.7) (64.4) (84.5)
Cash from Ops. 54.4 133.4 267.1 436.5 569.0 807.0
Capital Expenditure (50.0) (89.0) (125.4) (278.0) (547.6) (507.2) Cash Acquisitions - - (60.5) (6.7) (220.5) (676.7) Divestitures - - - - - -Sale (Purchase) of Intangible assets
(4.5) (7.4) 3.5 (12.5) (33.0) (1.1)
Invest. in Marketable & Equity Securt.
- (239.4) (245.5) (1,055.4)
(1,472.3)
386.4
Net (Inc.) Dec. in Loans Originated/Sold
- - - - - -
Other Investing Activities (1.1) (2.7) (5.1) (4.9) (19.8) 6.6 Cash from Investing (55.6) (338.5) (433.0) (1,357.5)
(2,293.3)
(792.1)
Short Term Debt Issued - - - - - -Long-Term Debt Issued - - - - 1,305.4 -Total Debt Issued - - - - 1,305.4 -Short Term Debt Repaid - - - - - -Long-Term Debt Repaid - - - - - -Total Debt Repaid - - - - - -
Issuance of Common Stock 4.8 445.9 61.3 1,405.5 66.4 71.0 Repurchase of Common Stock (0.2) - - - - (25.2)
Total Dividends Paid - - - - - -
Special Dividend Paid - - - - - -Other Financing Activities (0.3) 6.6 35.3 48.7 16.7 32.1 Cash from Financing 4.3 452.5 96.6 1,454.2 1,388.5 77.8
Foreign Exchange Rate Adj. (0.1) (1.3) 0.8 (0.5) (6.4) (7.4) Net Change in Cash 3.0 246.1 (68.6) 532.7 (342.2) 85.4
Comparable Companies Analysis (Slide 11): Source: S&P Capital IQS&P Capital IQ Estimates
Company P/B - MRQ EV/Revenue EV/EBITDA Net Profit Margin
LinkedIn Corp 3.4x 4.9x 48.5x -5.55%Monster Worldwide Inc 0.6x 0.5x 4.9x 11.04%
Facebook Inc 7.4x 16.3x 41.6x 20.57%Twitter Inc 2.6x 4.9x (31.9x) -23.49%
Comparable Companies Analysis (cont.) (Slide 12): Source: S&P Capital IQS&P Capital IQ Estimates
Company 2015 Sales
Growth
2016Sales
Growth 1Yr
2017 Sales
Growth 2Yrs
2018 Sales
Growth 3Yrs
LinkedIn Corp 2,990.91 0% 3,674.88 122.87% 4,416.53 147.66% 5,281.73 176.59%Monster Worldwide
Inc 666.90 0% 648.66 97.26% 668.07 100.17% 709.90 106.45%
Facebook Inc
17,928.00
0%
25,605.75
142.83% 33,893.52 189.05% 43,561.9
9 242.98%
Twitter Inc 2,218.03 0% 2,958.26 133.37% 3,714.63 167.47% 4,502.47 202.99%
Charts 2-Year Performance (Slide 13 & 14):Source: S&P Capital IQ
Dates: 3/30/2014 to 3/30/2016.Relative Performance.Slide 13: focused comparison.Slide 14: broad comparison.Constituents:
-LinkedIn Corp(LNKD)-Monster Worldwide Inc (MWW)-Facebook Inc (FB)-Twitter Inc (TWTR)-S&P 500 Index (^S&P500)-S&P 500 Internet Software and Service
Index.
S&P 500 Internet Software and Service Index (4/17/2016)
Company Name
Exchange: Ticker
Market Cap (mm)
Revenue (mm)
Price Close P/E P/BV
Akamai Technologie
s, Inc.NasdaqGS:A
KAM 8990.39 2197.45 50.93 28.61x 2.89x
Alphabet Inc.
NasdaqGS:GOOG 529633.13 74989 759 32.17x 4.46x
Alphabet Inc.
NasdaqGS:GOOGL 529633.13 74989 780 33.06x 4.46x
eBay Inc. NasdaqGS:EBAY 28817.28 8592 25.22 15.76x 4.54x
Facebook, Inc. NasdaqGS:FB 321611.46 17928 109.64 84.82x 7.03x
VeriSign, Inc.
NasdaqGS:VRSN 9657.59 1059.37 88.7 31.45x NM
Yahoo! Inc. NasdaqGS:YHOO 34568.09 4968.3 36.51 NM 1.19x
Historical pricing data provided by:
-20%
-15%
-10%
-5%
0%Working Capital to Revenue
Discounted Cash Flow Analysis (Slide 15):
Total Revenue, EBITDA, EBIT, EBIAT, D&A, Capital Expenditures.Source: S&P Capital IQ Estimates
Change in Net Working Capital: Most relevant driver: Total RevenueCorrelation Coef: -0.3065Sd: 0.022Mean: -12.43%
Driver FY2011 FY2012 FY2013 FY2014 FY2015Revenue $522.19 $972.31 $1,528.55 $2,218.77 $2,990.91
Change in Revenue * $279.10 $450.12 $556.24 $690.22 $772.14 Correlation Coefficient -0.3065
Working Capital to Revenue -14.98% -15.03% -14.12% -9.19% -12.45%Standard Deviation 0.022Mean -12.43%
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Revenue $4,501.22 $4,347.72 $5,144.81 $6,032.47 $6,578.36 $7,401.22
WC to Revenue -12.45% -12.43% -12.43% -12.43% -12.43% -12.43%Working Capital $(560.42) $(540.35) $(639.42) $(749.74) $(817.59) $(919.86)Change in Working Capital $(168.38) $20.06 $(99.07) $(110.32) $(67.85) $(102.27)
Discounted Cash Flow Analysis (cont.) (Slide 16):Source: S&P Capital IQ
Terminal Value
Growth in Perpetuity Method (1)
Long-Tern Cash Flow Growth Rate 4.00%
Final Projected Year Cash Flow $632.51
WACC 8.75%Terminal Value $13,843.78
Presnt Terminal Value $ 12,729.72
Exit Multiple Method EV/EBITDA (3)
Average EV/EBITDA (MWW, FB, TWTR) 15.78
Final Projected EBITDA $1,130.60
WACC 8.75%Terminal Value $17,837.98 Presnt Terminal Value $16,402.50
Risk Free Rate of Return (10-year Treasure Bill)
1.91%
Beta of the security 1.418
Expected Market Return 7.14%
Market Risk Premium 5.23%
WACC - CAPM Method
Cost of Equity 9.38%Cost of Debt 4.52%Tax Rate 37.50%After Tax Cost of Debt 2.82%
Total Equity $ $4,468.64 Total Debt $ $1,126.53 Total Capital $5,595.18
Equity Weighting 79.50%Debt Weighting 20.50%
WACC 8.03%
Price Target Ranges (Slide 17):Source: Yahoo Finance
P/B:EV/Revenue:P/S:Capital IQ Concensus:
See Slide 16 for Growth in Perpetuity and Exit Multiple Method
Name Ticker
P/B - MRQ
EV / Revenues
P/S - MRQ
LinkedIn Corp. LNKD 3.4x 4.9x 5.1x
Monster Worldwide Inc.
MWW 0.6x 0.5x 0.4x
Facebook Inc. FB 7.4x 16.3x 18.3x
Twitter Inc. TWTR 2.6x 4.9x 5.2xLast Twelve Months LTM
Pessimistic Mean
Optimistic
P/B implied
3.02 3.52 4.02
BVPS Actual
33.83 33.83 33.83
Price per Share 102.15 119.07 135.99
Last Twelve Months LTMPessimisti
c MeanOptimisti
c
EV/Revenue implied 6.16 6.66 7.16
Revenue Actual 3209.41 3209.41 3209.41
EV Implied 19762.61 21367.31 22972.02
Debt 546.24 546.24 0.00
Cash 581.70 581.70 581.70
Equity Value 19216.37 20821.07 22972.02
Price per Share 145.50 157.65 173.93
Last Twelve Months LTMPessimisti
c MeanOptimisti
c
P/S implied 6.26 7.26 8.26
Sales per Share actual 22.65 22.65 22.65
Price per Share 141.82 164.47 187.11
S&P Capital IQ Consensus Estimates
Target Price:Mean 172.5High 250Low 120
Std. Dev. 32.41
Price Range (1 Std. Dev. – 68%) 140.09 204.91
Last Twelve Months LTMDCF Analysis Quartile 1 Mean
Quartile 3
Price per ShareEV/EBITDA 122.00 131.56 145.76
Growth in perpetuity
117.65 123.63 129.46