LinkedIn-stockIt’s been a rocky four years for LinkedIn (NYSE: LNKD). The career-focused social network went public in May 2011, and has endured many ups and down since.

And it’s been more down than up since last week, when LinkedIn released a second-quarter earnings report with a whole lot of mixed signals. On Friday, LinkedIn stock lost more than 10% of its value. More on that in a moment.

But first, since I just recently wrote about why Twitter’s (NYSE: TWTR) massive reach makes that company a good investment even if it is not yet making money, it’s worth considering where LinkedIn fits into the social media sphere.

Certainly, LinkedIn is on the short list of social media tools that are household names and widely used. LinkedIn has 380 million members, enough to be a country in its own right. But note this: At a time when it’s possible for online content companies to become so big so fast, the value of all those eyeballs or followers, or whatever you call them, has deflated a bit.

Even many who actively use LinkedIn to network would have to admit that it lacks a certain something that has propelled Twitter and Facebook (NASDAQ: FB) so far. My sense is it has something to do with stickiness.

LinkedIn is functional, but it’s not necessarily entertaining in the way that vacation photos or pithy 140-character one-liners can be. We use it because, well, that’s the way networking is done these days, but logging on may still be seen by some as more of a chore than a pleasure.

Premium Subscriptions

I draw this distinction because, while earnings numbers can tell us a lot, there are also some less tangible reasons why investors might generally feel more comfortable with a money-losing Twitter than with a money-losing LinkedIn.

During the second quarter, LinkedIn’s revenue grew an impressive 33% to $712 million, and its premium subscriptions revenue – which is core to its growth strategy – rose 22% to $128 million. LinkedIn also reported non-GAAP net income of $71 million and a GAAP net loss of $68 million. Guess which of those figures investors focused on?

Indeed, while much of the second-quarter data looked good at first glance, there were several different interpretations. Overall results beat analysts’ forecasts … except that earlier in the spring LinkedIn had lowered its expectations, so the results reported last week only beat analysts’ lowered expectations.

Beyond the Red Ink

Likewise, while it’s typical for companies to report operating as well as GAAP net income, the disparity between these two numbers was so great that it almost served to highlight the fact that LinkedIn is still losing quite a bit of money.

While LinkedIn may never have the entertainment appeal of Facebook or Twitter, it has undoubtedly built a valuable property. And the content it features has improved noticeably over the past year.

The question investors are wrestling with, though, is just how valuable is any career-focused social network? At its current price, LinkedIn stock is worth considerably more than Twitter. I’m just not sure that valuation is justified.

I’d expect more rocky days ahead for the company and the stock as it settles in on a fair valuation. For investors who are allergic to volatility, LinkedIn stock may be one to pass on.

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Published by Wyatt Investment Research at