LinkedIn Looking Forward to Another Strong Year

While Facebook is garnering more and more attraction as it takes a step closer to launching possibly the biggest IPO of the year, LinkedIn quietly reports only continual improvement. Unlike many other social networking companies that issued a 2011 IPO or dropped in stock prices, LinkedIn reported heavy earnings in the fourth quarter of 2011. Its earnings came in at $6.9 million, or 6 cents per share. Revenue was $167.7 million, a 105% up from just a year ago. For 2011 overall, LinkedIn posted revenue of $522.2 million, a 155% leap from its 2010 figures. All of these numbers topped analysts' estimates, according to FactSet. Moreover, LinkedIn looks forward to this year as it estimates a revenue of $170-175 million for 2012 Q1 and revenue of $840-860 million for the year 2012.

LinkedIn ended 2011 with over 9,200 corporate customers, up 139% from 2010. More than 60 million members joined, and it began testing Talent Pipeline, a new recruiting product that allows recruiters to easily connect and stay in touch with candidates. The company also grew by over 100% for the sixth consecutive quarter. This quarter, shares already climbed by 4% to $79.85 on the second of February.

With technology advancing incessantly and trends and taste changing so fickly, it is difficult for social media companies to meet the needs of customers at all times. However, as shown, LinkedIn seems to do a good job as it continuously boosts its stock prices and looks into the future with ambition. This year, we will need to keep an eye open as we continue to track the development of LinkedIn as well as the shift in power within the social media industry.

by Chris Kim

Apple hits 500. Next stop, $650?

At the opening of today's market, Apple reached an all time high of 503.83. Here are a few reasons why Apple continues to grow:

- Constant innovation and high consumer demand. Steve Jobs is quoted for saying, " A lot of times, people don’t know what they want until you show it to them.” Apple is working on the iPhone 5 and it now has an Apple TV on the market. Macs continue to dominate PCs in terms of quality, and iPods remain the default go-to MP3 player.

- Recent earnings report. Apple blew away expectations, reporting earnings of $13.87 per share on January 24, 2012. This beat many analyst's expectations of which the consensus was $10.87.

- Rumors of a dividend. Apple has so much cash that it cannot possibly spend more than it currently is on research and development, and many investors are hoping for a dividend from Apple. It is holding 9.8 billion in cash according to their balance sheet as of 9/24/2011, and with the recent earnings report, we know that it must have grown.

-Global expansion. Apple is now breaching into China with its iPhone 4S, and it has yet to completely enter India.

Bottom line:

With earnings continuing to rise and Apple's presence in the world continuing to expand, it seems as if nothing is going to stop future growth of the stock.

However, there are headwinds facing Apple.

-One of the current risks involved with Apple is its growing concern with its supply chain. Apple is receiving criticism about the working conditions of its suppliers based in China. The factories that produce parts for Apple products are now undergoing audits from the Fair Labor Association.

- The Windows Phone from Microsoft/Nokia and the growing Android line of smart phones possess threats to the popular iPhone from Apple. Apple is worried about losing market share, and is currently filing lawsuits against Samsung's Galaxy Nexus for infringing four patents of Apple's.

I strongly feel that Apple has much more room to run up. The headwinds that Apple faces are only short term, and because of their constant innovation, their products will remain competitive and superior to others in the long term. Apple recently broke the $500 mark, which was more or less a psychological resistance level, and now is most likely poised to take a breather. Many people have hit their price targets and are willing to exit, while some are still holding and anticipating higher returns still. If Apple decides to split its stock so that smaller investors can enter the market (which it has done before), then the stock price will benefit tremendously. Therefore, with the significant upside and minor risks Apple faces, I believe that by the end of this year we will see $550, and by next year we will see $650, given that the stock will not split.

- Kunal Agrawal

FS UPCOMING EVENT

Superstar Senior Panel

Date: February 16th, 2012

Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society this week as it hosts a panel of superstar seniors who will be working across Wall Street in different job functions (Investment Banking, Sales and Trading, Research, Asset Management, Graduate Studies). Come prepared with any nagging questions you have about life at Stern and hear their insight into majors, classes, recruiting, and finding internships!

Can't Decide on Apple? Buy Qualcomm

Are you still not sure whether Apple is a good buy or not? Despite the many investors who believe it’s overvalued the stock continues to rise. I believe it’s because mobile technology is constantly evolving. If you also think that this industry has huge long term growth potential then Qualcomm may be the smarter purchase.
Qualcomm (QCOM) is an incredibly successful company who enjoys a first-mover advantage and is the leading player in mobile technology. They are the suppliers for major corporations such as Apple, Samsung, Nokia and HTC who provide us with smartphones, tablets, and anything else that needs a mobile connection. Microsoft has recently announced that they will also use their products for the new Windows 8 operating system. Therefore it is clear that it doesn’t matter who wins the war in the tablet and smartphone markets because they all use Qualcomm in one way or another.
Qualcomm creates the chipsets and the technologies used to spoil us with our 3G and 4G capabilities and best of all they have the ability to sustain their advantages. Currently they have more than 200 patents that allow them to make over 35% of their revenues through licensing technologies and collecting royalties. Recently the company announced record quarterly results in receiving $4.82bn in revenue, which is up by 40% year-over-year. Right now they are trading at $61/share with a market cap of $104bn and they have no long term debt. They paid out over $300 million in a cash dividend and repurchased 2 million shares of common stock last year. Both of which are great signs for shareholders.
Lastly the biggest source of growth I see in the near future is the likelihood of developing markets like China, India, and Latin America to upgrade their devices with the 3G and 4G capabilities. Currently they all use older systems but have very large mobile markets.

My Big Fat Greek Debt Crisis

Even with debt talks currently underway, the dooming cloud of default and contagion still hangs over Greece’s shoulder. The Greek political muddle risks the country of further distressing their increasingly faltering economy. However, the solution may not be as simple as it seems.

Two years after having their bonds rated as junk and having been through a myriad of both proposed and enacted austerity measures, Greece sits on an estimated debt of 160% of GDP. It seems that no measure so far has had any significant impact on altering the course of the Euro-member’s economic outlook.

In the midst of all the recovery efforts, the political health of Greece had been faltering as well with Greek Prime Minister George Papandreou resigning late last year after issues with partial Greek Debt write-down of 50%.

The failure of government officials and bondholders to strike a deal on debt continues to invoke fear in the markets and global economy. Contagion, if not properly guarded against, could prove to undermine any progress made on recovery thus far, further launching related countries into economic distress. Nevertheless, argue an exit from the Euro may be just what is necessary to prevent Greece from further troubling the other Euro-member nations.

But a Greek exit from the Euro may spell more trouble than what it’s worth. Legal documents, contracts, and the general way of life would be submit to chaotic confusion for a period of time perhaps long enough to prevent any meaningful changes to occur in Greek spending. For now, Greece wants to remain.

With fears of contagion and spillover, it is imperative that Greek and EU leaders come to an effective agreement over how to solve the crisis as efficiently as possible.

- Patrick Malanga

FS UPCOMING EVENT

The Dangers of Insider Trading

Date: Thursday, February 9th, 2012

Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society this week as it hosts Garrett Bauer, who will give a talk on the Dangers of Insider Trading. Mr. Bauer is a white collar criminal who last year was convicted for his involvement in an insider trading scheme that spanned nearly 15 years. He will talk about what he did, how he was caught, and the lessons he has learned as he heads to federal prison in the coming months.

Former Traders at Credit Suisse Are Among The First Few To Be Charged With Bond Fraud, But Where's The Rest of Them?

Federal prosecutors filed criminal charges against three former Credit Suisse traders on Wednesday, accusing them of unjustifiably inflating the value of mortgage securities. The apparent incentive of the traders in New York and London was to increase their year-end bonuses from the bank. Two of the Credit Suisse traders pleaded guilty and both are cooperating with the investigation. Their boss, an American citizen who headed the group that traded mortgage-backed securities, is still in London. His lawyer spoke on his behalf, ensuring the public that his client is fully cooperating with the ongoing investigation. While appearing in Court on Wednesday, Mr. Higgs, 42, and Mr. Siddiqui, 36, both said that they participated in the fraud under the orders of Mr. Serageldin, their boss.

“The stunning scale of the illegal mis-marking in this case was surpassed only by the greed of the senior bankers behind the scheme,” said Robert Khuzami, the head of enforcement at the SEC.

This case is among the government’s first criminal prosecutions involving a bank’s valuation of C.D.O.’s, or collateralized debt obligations, which are essentially composed of bundles of mortgage bonds. These securities contributed heavily to the housing bubble and its collapse, which brought about the financial crisis of 2008.

The Justice Department has been attacked with major criticism for not bringing enough criminal cases directly connected to companies at the center of the financial crisis. The charges have come just about a week after the President pledged in his State of the Union address intensify investigations involving financial firms. According to President Obama, the new task force shall "hold accountable those who break the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.”

The losses tied to the pricing mismatches were a major embarrassment for Credit Suisse, which performed better than most of its rivals during the credit crisis. The firm, which has been cooperating with the authorities during the investigation, will not be charged in the case.

Taking into the account the very low number of criminal prosecutions involving a bank's valuation of mortgage bonds since the crisis, it's clear that enough justice hasn't been served. Is the government prosecuting enough people related to misconduct during the financial crisis? Clearly not, but don't forget that complex financial fraud cases, like this painstaking 4-year-old Credit Suisse investigation, take time to build. They are also extremely difficult to prove. Who/what is to blame for the slow progress?

Mr. Bharara, the federal prosecutor whose office brought the case, has become a leading figure in the government’s effort to combat financial fraud. Responding to a reporter's question, he said, “The number of prosecutions is not a function of resources, effort, commitment, or courage...It is a function of the laws...”

-MEHYAR AFKARI