The current price values LinkedIn at about $10 billion. Even assuming its revenues double this year to $500 million, that would mean LinkedIn is trading at 20 times revenues on a forward-looking basis. In a blog post yesterday, The New Yorker's John Cassidy pointed out that Salesforce.com, "the cloud-computing firm that many consider a bubble stock, trades at ten times revenues, and Google trades at five and half times its sales. True, LinkedIn has real sales and is profitable, but still, that's getting a tad frothy.
Given the demand for LinkedIn shares, can you imagine how Internet IPO-starved investors will react to expected offerings for even hotter companies like Groupon, Zynga and, of course, Facebook (already carrying a roughly $70 billion valuation in the private market)? Mr. Bubble's back.