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business newsWill LinkedIn's IPO Confirm Internet Bubble 2.0?
Some of today's hyped web companies may be overvalued, but there are plenty of established players in the cloud computing space.
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The crisis that preceded the current one was caused by hyper-inflated valuations of Internet companies that made no profit, and about whom investors knew little or anything about. Sound familiar?
Yes, we could be talking about numerous companies that have hogged recent headlines: Facebook, Zygna, Twitter and LinkedIn, for example. All are purveyors of what's known as “social media.” All have been the subject of intense speculation and rather opaque trading in the private stock trading markets. But now one is about to depart the safety of those illiquid markets and is venturing out into the public.
LinkedIn goes public this morning with as much hype as can be expected of the vanguard of social media. Despite its $45 price, many observers, myself included can only wonder if its fate will resemble that of Renren (RENN). The self styled "Facebook of China”, Renren has had a very rocky reception in the market since its own IPO. It's now trading at little more than half of its public offer price.
My gut tells me LinkedIn’s IPO may be more of the same. There's a lot of excitement, regarding this company. Smart traders and investors sell when the market is excited. I would wait until some of the fervor dies down before entering this trade.Now if you're interested in web-based companies but seek those positive checks smart investors seek, such as profits and market share, you will not have to wait for a possible Facebook IPO. The cloud space has several established players but none is bigger than Salesforce.com (CRM). Salesforce is the market leader in customer relationship management software and is growing consistently. Its current valuation at 10 times sales may seem steep, but given the vast array of analysts who believe its price should be around $155-$170, it may be turn out to be a value growth play if the market continues yesterday’s upward bounce. SmartStops.net has a short-term stop at $125.79 and the long-term stop at $121.66.
If cloud computing seems a little far-fetched for you, what about business-to-business networking, otherwise known as social media for businesses? Now imagine it coming to the web. I’m talking about potential $12 trillion in business. Did that start up your saliva glands? Ariba (ARBA) is the leader in this space. They are a way ahead of their competition. And the market has appreciated its subscription-based revenue model, pushing the stock up 400% in the past four years. So, is Ariba undervalued, or is LinkedIn overvalued? The market will tell us. According to SmartStops.net Ariba’s short-term stop is at $29.67 and the long-term stop is at $28.49.
Editor's Note: This content was originally posted on SmartStops.net.
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