Call Options Or Put Options On LinkedIn (LNKD)?
LinkedIn (LNKD) is the world’s largest online professional network. The company’s website allows members to create, manage, and share their professional identity online, as well as share knowledge and find business/job opportunities.
LNKD shares are trading at $231.77 and are up an impressive 102% for the year. The stock’s up 145% from the 52-week low of $94.75 and is just 5% below the 52-week high of $244.00.
Is this an opportunity to buy call options on LNKD with the company expanding its services to students? Or should you buy put options on LNKD due to the stock’s sky-high valuation?
The bulls make a convincing argument…
LNKD just announced it will be expanding its services to students – both college and high school. The most noteworthy new feature will be the site’s University Pages, where roughly 200 universities will have their own hubs.
The company is attempting to attract a younger membership base – and a whole new market for potential revenues.
You see, high school and college students can use LinkedIn as a way to research schools, fields of study, and future job opportunities. As such, it makes perfect sense as an area of expansion.
The clear benefit to LNKD is the potential for new advertising and service fees from universities, students, recruiters, and more. This move could open up a whole new channel of business opportunities for the rapidly growing company.
But the bears have a compelling case as well…
LNKD runs the risk of potentially alienating its thriving adult user base by opening up its online community to a younger audience. Will the company be able to prevent CEOs from getting networking requests from 14 year olds?
And, despite growing revenues, the stock is still trading at a whopping 662x earnings. Even if you look at future income, the valuation is still sky-high at 105x projected earnings.
It doesn’t seem like University Pages is the sort of service which will generate enough fees to justify the unrealistic valuation investors are placing on the shares.
So is LNKD’s service expansion a buying opportunity, or are expectations too high to justify the stock’s lofty valuation?
If you think the bulls are right, take a look at buying the LNKD September $250 calls for around $3.00.
If you think the bears are right, take a look at buying the LNKD September $215 puts for around $3.00.
Yours in Profit,
Gordon Lewis
Category: Call Or Put Options?
