Part 3/5:
The muted reaction to the earnings can be partly attributed to lingering concerns about LinkedIn’s valuation. The stock has suffered a significant decline over the past year, dropping roughly 50%, leading to skepticism about the sustainability of its high valuation multiples. At present, the stock trades around 40 times 2016 earnings guidance — and this multiple only applies if stock compensation expense is excluded. Including these expenses, which many argue should be factored in, drastically inflates the valuation, making it much harder to justify from a fundamental perspective.