Groupon, LinkedIn and Zynga all Reported Earnings – Who’s Hot and Who’s Not?

Groupon – Revenues sizzled, earnings fizzled

I want to take a look at and talk about three social networking companies, how they fared in their most recent quarterly earnings filings and what may lie ahead as we move through the fiscal year.

February 8th saw Groupon’s first quarterly report as a publicly traded company. The revenue number came in at $506.5 million, almost 8% higher than estimates. While the company stated it had turned an operating profit of $15 million, for the first time in nearly two years, the anticipated earnings of 2 to 4 cents per share did not happen.

The company posted 2 cents per share losses for the quarter stating issues such as higher non-marketing costs ($247.4 million). Groupon also guided revenues for the next quarter as flat (compared to this quarter) to as much as $550 million best case scenario.

During the next 8 trading sessions, GRPN shares lost as much as 23%, before rebounding just a tad on February, 14th – Valentine’s Day. Perhaps investors were using that day to show Groupon some love.

LinkedIn – Revenues and earnings sizzled

February 9th was earnings day for LinkedIn. The company posted revenues of $167.7 million on expectations of $160 million. That’s 5% above expectations, yet barely over 1/3 of Groupon’s revenues and Groupon beat their expected number by a greater percentage.

Look at how LinkedIn preformed stock wise. During the next 7 trading sessions, LNKD shares exploded and continued to trend higher by almost 23%. So what does LinkedIn have that Groupon doesn’t?

Earnings; both companies reported excellent revenue numbers that beat expectations. When that happens, it usually follows that earnings will be higher than expected as well. In LinkedIn’s report, expected earnings were a penny per share, LNKD spanked that number and came in at 6 cents per share. Groupon on the other hand still lost 2 cents per share.

Both companies also had short positions in place. Investors were placing bets that shares of both companies were going down. As it turns out, one could have made the argument to SELL GRPN and BUY LNKD.

Zynga – Revenues and earnings sizzled, expenses fizzled

February 14th was a bit of a bloody valentine for Zynga. Revenues came in at $311 million verses expected $301 million a decent 3.3% surprise to the upside. However, research and development costs were through the roof at almost $445 million or almost 2.5 times the R&D expenditures of a year ago.

The shares of Zynga (ZNGA) got zynged as well losing almost 18% the very next day. The share price had recouped about half of what it had lost by Friday’s (2/17) close.

What does all of this mean?

The relations between the three companies are varied. Featured are a social daily dealer, a social professional site and a social gamer. All three beat their revenue expectations. All three projected revenue growth in future quarters, but Groupon and Zynga hinted that the astronomical growth that had been witnessed may be (ok, is definitely) slowing.

These are three of the companies that make up what is being touted as the Internet Bubble II. Facebook, which will IPO later this year, will be another piece of that internet bubble part 2 puzzle. The adversaries for companies like these, well certainly Groupon and Zynga continue to harp on the validity and sustainability of the industries.

It’s clear that there is growth within all three companies; it’s just a matter of how much. As usual, expenses have to be reeled in or else share prices and share holders will be decimated or at best case, just loose confidence in the companies reporting.

It should also be clear that in all three cases, the stock price moves were harsh. This once again reiterates the concerns of holding ‘high flying’ stocks through an earnings report. Zynga got a huge boost from Facebook comments regarding the sizeable percentage that the social gamer contributes to Facebook revenues. It will be interesting to see how all this plays out after the Facebook IPO.

Depending on how things go with the SEC we may see another round of quarterly reports from these three socially engaging amigos before the IPO. One thing for sure about this new internet sector, it’s certainly far from boring.