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Should Linkedin Sell To Facebook? This Analyst Thinks So

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Should LinkedIn Corp LNKD sell itself to Facebook Inc FB? Alexis Dawance, head of equities at MFM Mirante, thinks so.

A couple of weeks ago, Dawance was on CNBC discussing trends in the social media space. Facebook is "a fantastic company. But it's a big company. It's priced for perfection… [and] it's very difficult to grow from here." He added that MFM Mirante is not completely negative on the stock.

However, within the social networking arena, the firm believes there are two major players: Facebook and LinkedIn. The gap between these two stocks' valuations has never been larger.

Dawance went on to point out that Facebook has four times more registered users than LinkedIn and seven times its revenues. Nonetheless, Facebook's enterprise value is 25 times higher than that of LinkedIn.

"So, with its cash, Facebook could just on one day –today- buy LinkedIn,” which is worth roughly $12 billion or $12.5 billion, he explicated.

But Why?

Why would Facebook want to buy LinkedIn, if it could develop a professional network of its own?

LinkedIn's revenue is still growing at a 25 percent rate. Consequently, Dawance sees it as "a leader in an interesting market." This doesn't mean Facebook has to buy the company, he clarified, but it could if it wanted.

The analyst explained why he believes LinkedIn has a standalone value.

"You don't want to give all your information to one provider," he said, "then they would know everything about your private life, and everything about your professional life. And then, they would add on data to send more advertising."

There is another interesting point regarding Facebook, though.

"There is a trend of people putting less and less personal messages or pictures, and putting more and more news, videos [and] external data on their own wall. So, that's also a problem for Facebook, because the less personal stuff you put on it," the less the company will know its customers, and the less it will be able to sell ads.

he second issue is teenagers: "Don't underestimate, teenagers are fascinated by Snapchat…They don’t want to belong to a club where their parents are a member."

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

DateFirmActionFromTo
Apr 2016MKM PartnersDowngradesBuyNeutral
Apr 2016Credit SuisseMaintainsOutperform
Apr 2016CitigroupMaintainsNeutral

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