Will the American Jobs Act Boost LinkedIn’s Growth?

President Obama’s ambitious $447 billion Jobs Act is a significant opportunity for LinkedIn (NASDAQ:LNKD) to capitalize on the increased hiring expected by small businesses in the U.S. ^[1] With Obama’s town hall meeting hosted by LinkedIn itself, ^[2] the professional networking site benefits from even greater visibility after its much-hyped IPO earlier this year. The big question is however whether or not LinkedIn manages to work as efficiently for small businesses as it does for its large and well-known corporate clients as this is the real key to job growth and the underlying message Obama was promoting. LinkedIn competes with other online job portals such as Monster (NYSE:MWW) and Craigslist. It also competes in the online advertising space with Facebook, Yahoo (NASDAQ:YHOO) and Google (NASDAQ:GOOG).

See our complete stock analysis for LinkedIn’s stock here

The Upside: Greater Visibility and Increased Users

With LinkedIn being chosen as the host for Obama’s town hall meeting this past Monday, the company benefited from greater visibility and an implied endorsement from the White House as a job creator and innovator given its focus on professional networking. Additionally, despite the U.S. unemployment rate in the +9% range, ^[3] there are still around 3.2 million available jobs in the country. ^[4] This presents a big opportunity for LinkedIn to bridge this employment gap.

Given Obama’s pressing need to improve the economic sentiment in the U.S., much of which relies on employment growth, it would not be a surprise if LinkedIn gets further endorsement from large and small businesses presenting a clear upside to its user base which is already 120-million strong.

The Challenge: Can LinkedIn help Small Businesses Like it Helps Corporates?

While being in the public spotlight never hurts, the challenge for LinkedIn is whether it manages to help small businesses find the right employees. LinkedIn’s professional networking features – while being highly useful – do not come cheap. Willing employers have to shell out well over a hundred dollars to get their job posting up for 30 days. ^[5] While large corporates can afford these fees as well as maintain their professional accounts, small businesses do not have comparable resources to invest in their job postings. LinkedIn needs to take that extra step in order to help these businesses, whether its through discounts or other promotional plans.

We currently hold a price estimate of $34 for LinkedIn’s stock, which is well below the current market price. Refer to our article Why LinkedIn’s Fundamentals Don’t Support the Market Price on why we think the market is getting ahead of itself on the company.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. The American Jobs Act [↩]
2. Forbes: LinkedIn To Get Presidential Spotlight As Obama Talks Jobs [↩]
3. Bureau of Labor Statistics: Employment Situation Summary [↩]
4. LinkedIn Blog: LinkedIn Town Hall with President Obama: Putting America Back to Work [↩]
5. LinkedIn Learning Center Overview [↩]