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LinkedIn (LNKD) – The Ropa-a-dope

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You don't have to be 60 years old to know the story of Mohammad Ali and the Rope-a-dope tactics he employed upon the great and unbeatable George Forman. Ali was able to absorb Foreman's punches until he was fatigued, then fought back to win the match. Titled "The Rumble in the Jungle", the fight will go down in history as one of the top sporting events.

So what does this have to do with stocks or LinkedIn (LNKD)? The first question to ask is what is the definition of the Ropa-a-dope?

In competitive situations other than boxing, rope-a-dope is used to describe strategies in which one party purposely puts itself in what appears to be a losing position, attempting thereby to become the eventual victor.

LinkedIn(LNKD) has been trading for over a year since it's IPO and has endured quite a few negative material events. You had the secondary offering of 8.75 million shares in november of 2011, the ending of the 55 million share lock up in march, the password breach in June, the Facebook Job board rumor, the devastation of social network stocks like Facebook (FB)/ Zynga (ZNGA)/ Groupon (GRPN), and oh yeah LinkedIn trades at insane valuations.

Taking all that data into account, one would assume LinkedIn (LNKD) would be trading down from it's IPO, yet its up over 10% from it's close price that day, and over 100% from it's IPO price. How can that be? LinkedIn has a $10 billion market cap yet will do less then $1 billion in revenue this year and has an astronomical P/E ratio 634. With other social media stocks reporting lackluster results so far this month, it would be hard to think LinkedIn (LNKD) would not follow suit. And with it's lofty valuation, it would be easy to figure a 20%+ downward move on any type of earnings miss.

The market has had a tough time deciding which way LinkedIn (LNKD) will go after hours thursday, and has traded in a wide range this week. I expect that to continue as the bulls and bears exchange punches.

But does't LinkedIn(LNKD) feel like its pulling the Rope-a-dope on the bears. Lulling them into a false sense of victory? You would think LinkedIn(LNKD) should be down for the count already with the earnings report on thursday being the big uppercut. But we wrote about this after their last earnings report. It's all about growth, and LinkedIn (LNKD) continues to bring it.

We fully expect to see continued growth from LinkedIn as it passes Facebook (FB) as the "Best of Breed" in the social media sector. Have a feeling the bulls will come fighting back on the bears after Thursday 'Rope-a-dope" style. I'll leave you with a great interview with CEO Jeff Weiner on CNBC in February .

“I’ve said it in the past; I would say it again: We leave the valuations to the marketplace. We focus on executing our plan. We focus on our fundamentals. And if we get that right, over the long term I think the valuation will take care of itself,” he said.

As to the idea that a tech bubble exists, Weiner sounded bullish.

“To some extent, I think if you spoke to some analysts who are covering these companies, they’d tell you that the premium valuations in multiples that some of these companies enjoy are based on their growth rates and the prospects ahead of them,” he said. “And that’s why it’s so important for the segment to focus on the long term.”

 

Disclosure we currently hold the $120 and $130 weekly Linked (LNKD) calls.

7-17-2012 Watchlist – FB, LNKD, CMG, WYNN

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Yesterday was a setup day for the week ahead. CMG WYNN and LNKD we on the watch list yesterday. Lets see how they play out this week. LNKD faded after the opening pop. WYNN and CMG held strong.

 

Seems like the ANALysts use the watch list as part of their research as both CMG and WYNN were upgraded this morning.

Still like WYNN for earnings, but doesn’t mean bet the farm. $105 weekly calls were reasonably priced at the open yesterday at .52/.55./60 throughout the morning. Figure WYNN may move 10%+ on a rosy forecast, so those 105 calls could be a 5-10 bagger come wednesday.

CMG calls are pricey so going way out of the money before the earnings thursday AH’s could prove to be a good bet. $450 calls or so IMHO.

BIG BEN bernacke will be all over CNBC today and tomorrow so expect continued expectations around some QE3 talks.

Stocks on watch today:

LNKD – still think she tests and breaks $110 sometime this week. Playing with 110 calls so far.

BLK- may look to get in on earnings. Like BLK down here, will post strikes in chat.

FB – Huge volume PM, may look for 30 calls at open.

CMG – out of the money calls for premium build – $440/450s

 

Thats all for now. I will be in audio most of the morning. Then after hours we pray for WYNN to PAY! ~

 

- Jimmybob

July 16th, 2012 – Watchlist : LNKD, CMG, PRX, EBAY, YHOO, GS, BLK

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After a huge rally on friday, it is not surprising to wake up to red futures. Earnings seasons starts to kick into full gear this week, and should bring some excitement to some rather dull weeks.

 

Some interesting news this morning on a stock i have followed for years PRX with a buyout offer of $50. Have to find a post i made about that one, but always though it was undervalued. Good thing about the deal, is they can pursue a better offer until Aug 25th, meaning someone may come and sweeten the deal.  Good idea would have been buying some leap calls.

Anyway onto the watch list:

WYNN – reports AHs tomorrow. The stock has taken a beaten on weakening vegas numbers as well as possible issues abroad. I have a feeling she beats nicely after last Qs hiccup. Will look for some $110/$115 strikes for the ramp. If she misses, stock will see $80-85, so could be a nice play either way.

LNKD – Bollie are tight on the chart, and i think the stock is ready to finally break and hold $110. Thought the test would happen friday, but i was wrong. Think it happens today or tomorrow. Will look for $115 calls sometime today : http://stockcharts.com/c-sc/sc?s=LNKD&p=D&b=9&g=0&i=p71833622492&a=255600933&r=1342443536796

CMG – think the story is not over with this one, at least not yet. I actually like BWLD as the next growth story, but think CMG has one or two last laughs in her. Earnings not till Thursday AH’s, but will look for some calls for a premium build and hopefully sell them before the close thursday. Will post more in chat,  but may go for the $430 calls @ $1 and hopefully feel for 50%+ the week.

 

Many other stocks on watch this week for potential plays: GS, BLK, YHOO, EBAY, GOOG …

Will have an earnings central post late tonight with strikes and opinions on some of the earning plays!

LinkedIn (LNKD)

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When I was a kid, my grandmother always told me don't talk to strangers. Fast forward 20 years, and I still hear her voice as I read countless opinions on LinkedIn (LNKD) and why it will go down from here.  Not that I will ever talk to some of those people, and I am sure as heck not going to listen to them. The bearish sentiment by the retail investor gives more credence to my argument that LinkedIn (LNKD) will see $150+ by the end of the summer.

It's only when a growth stock is in the midst of an epic run, that the retail trader starts getting on the bandwagon. And of course they are the ones holding the bag on the way down. It's how this market works, and  will never change. Just like the economy, the rich get richer and the poor get poorer.

LinkedIn(LNKD) is currently trading at 101.43 up 3.38% on light volume. Expect the knife to come out on the BEARS, as they are put back into their cave until the fall.