It took just a few positive comments from Monster Worldwide’s (NYSE:MWW) CEO to propel the company’s stock to the $8.50 mark at one point. The comments broadly stated that the company is pursuing strategic alternatives to “boost investor value,”  and were probably required in our opinion, given how the company’s shares languished in the past year. However, we continue to believe that the market is undervaluing Monster compared to its fundamentals, which is due to investors’ being enamored with professional networking site LinkedIn (NYSE:LNKD).
Takeover Could Improve Margins
Monster already announced a hefty cut in headcount of around 400 jobs (7% of its total) earlier this year, making it clear that the company is actively trying to improve cash flows by reducing expenses. An acquisition would likely further reduce these operating expenses as certain variable cost items benefit from economies of scale.
The deal would also give Monster access to deeper pockets which it can use to invest in mobile/social based tools and applications.
Having said that, we do believe that even in the present circumstances, the company’s fundamental drivers (primarily its career services) continue to justify the $11 price estimate, which is around 42% above the current market price.Notes: