LinkedIn shares lost close to half their value on Friday, in a gut-wrenching plunge that suggested investors are reevaluating their expectations for the social network.
The company's stock price fell as much as 46.5% during the day, to trade as low as $102.81 a share, after LinkedIn announced that it had lowered its projections for its own financial performance. LinkedIn shares had closed at $192.28 on Thursday.
The stock was down about 44%, at $108.38, by the close of trading Friday. The day's session erased $10 billion from the company's market capitalization.
LinkedIn, in a quarterly earnings report Thursday evening, released financial forecasts for the first quarter of this year and for full-year 2016 that fell short of what analysts had expected. Even though the company said its results for the fourth quarter of 2015 were better than expectations, the revised forecast was enough to spook Wall Street.
In explaining the lower forecast, LinkedIn pointed to several factors, including an expected slowdown in the growth of its talent solutions division, which makes software for recruiters. LinkedIn said it expected to generate about $820 million in the first quarter, short of analyst expectations of $867 million. For all of 2016, LinkedIn projected $3.6 billion to $3.65 billion of revenue, short of expectations of $3.9 billion.
In the past, LinkedIn has tended to give conservative projections of its performance, Nomura analysts said in a note on Friday. The actual numbers could very well turn out to be better.
"While the magnitude of the current guidance deceleration gives us pause, we believe it is possible management is executing a similar playbook to prior years," the analysts wrote.
One analyst, Robert Peck of SunTrust Robinson Humphrey, apologized for not appreciating how far the stock could fall in response to poor guidance from the company. "We were wrong - we hope to do better in the future," he wrote in a note this morning downgrading his rating for the company from Buy to Neutral.
As for why the shares dropped so much in after-hours trading and again today, Peck wrote "the weakness in the shares is related to not only the magnitude of miss but also lack of a concrete catalyst to point to in 2016 in a difficult tape and macro backdrop."
LinkedIn had been flagging for much of the last year, falling about 17% in the 12 months running up to yesterday's earning report, while the Nasdaq had fallen over 4% and the S&P 500 had fallen 3%. The company's stock is now trading near levels that it hasn't hit since November, 2012. The company first sold shares to the public in May, 2011, when the stock more than doubled to $94 after pricing at $45.