LinkedIn Corporation, an operator of a professional social networking website with over 225 million members worldwide, will announce Q3 earnings this week on Thursday after the close, and the consensus of analyst predictions places the company’s revenue at about $354 million with an EPS of $0.30.

REVENUE STREAM

Unlike its main competitor, Facebook, LinkedIn can charge users a premium to get a wider scope of exposure from highly professional enterprises willing to hire. Also, LinkedIn is able to make money from its users’ accounts even while they are logged off through its Recruiter product, which allows employers to browse and examine a variety of users with specific work abilities and talents on the site for a different premium.

Because of this initiative, LinkedIn is able to gain about $1.30 per user per hour while Facebook can only reel in $0.06 for every hour spent by each user on its site. The Recruiter product is easy to comprehend and is projected to grow significantly in light of the increase in entrepreneurship.

It also accounts for 60% of LinkedIn’s revenue with the other 40% composed of advertisements and user subscriptions, making the company’s balance sheet more stable and less subject to the precarious digital ad market. Also, the advertisements are directly related to the interests of each individual user, allowing for a higher hit-rate for ads and consequently a stronger cash flow. In addition, according to Alexa.com, LinkedIn is ranked 14th in the world and 10th in the U.S. for online traffic which will surely increase the company’s popularity and recognition among mobile platform users.    

EARNINGS OUTLOOK

Some analysts say that LinkedIn’s expectations are so high that even should the company do well it might still undershoot predictions and the stock speculation could suffer regardless of the earnings. After all, LinkedIn is trading at 15 times consensus revenue predictions, over 60 times adjusted EBITDA guidance, and 125 times consensus EPS estimates.

However, others cite that LinkedIn has beat the low end of analysts’ estimates for the past six quarters and has increased an average of 8.2% the day after earnings reports were released, thus showing a consistently strong track record that propitiously points to the bullish side. LinkedIn’s 52-week change is up over 100%, and the stock is trading high above the 50 and 200 MVAs with a short percent of float at 4.3%. YTD the stock is up over 75% and is trading about 2.3% down from yesterday’s closing at $208.53, one of the highest prices all month.

A TRADE IDEA

Possible Bullish Trade Set-Up: Buying the LNKD Jan 2014 200-250-300 Call Butterfly for $11.00 debit.  This is the same as buying the Jan 2014 200-250 Call Spread to Sell the 250-300 Call Spread

Risk: $1100 per 1 lot
Reward: $3900 per 1 lot
Breakeven: $211 and $289

(Full Disclaimer: I have no position on in this stock right now)