- Why We Revised Our Price Estimate For Monster By 20%
- Monster’s Stock Drops Over Disappointing Q1 Results, Q2 Guidance
- How Much Did Monster’s Revenue & EBITDA Grow In The Last Five Years?
- How Has Monster’s Revenue Composition Changed In The Last Five Years?
- What Is Monster’s Revenue And EBITDA Breakdown By Operating Segment?
- Key Reasons We Revised Our Price Estimate For Monster To $5
The Monster (NYSE:MWW) Employment Index for the United States inched up by 7% y-o-y  in the month of November. It was driven by strong growth in online job listings from retail trade, real estate and rental and leasing sectors. The data was corroborated by the U.S. Department of Labor which reported that the unemployment rate at 7.7% is the lowest in almost two years.  The core sectors of manufacturing and construction however reported a marginal decline in the number of openings and will define the overall employment scenario over the coming months.
Over the past year, enterprises have faced some trouble filling jobs despite a large pool of skilled unemployed workforce. We expect this to drive employers to use Monster’s services to aid their hiring processes. Even though social media is fast becoming the preferred destination for some employers as they scout prospective employees through their connections and past experience, we expect the size of Monster’s large resume database and its new cloud based semantic search services to help it compete with the likes of LinkedIn (NYSE:LNKD) and Facebook (NASDAQ:FB).
Improvement In The U.S. Job Market
The Monster Employment Index U.S. is a monthly gauge of the region’s online job posting activity. The index grew 7% annually in November as the retail trade and real estate sectors led hiring. While we expect the 16% y-o-y growth in retail sector to be temporary, growth in the real estate sector looks promising. Growth in the real estate sector could fuel growth in the finance and insurance sectors and may trigger an overall improvement over the coming months. An improving job market could result in an increase in job listings and hence drive more traffic to its websites.
The Internet Advertising and Fees division delivers online services primarily in North America and the U.S. comprises more than 90% of the North American business. Increased traffic resulting from higher job listings could result in an improvement in revenues from the division which declined ~35% during the first nine months of the current fiscal. This could in turn improve the company’s valuation and help in its search for strategic alternatives.
SeeMore And Power Resume Search Gain Popularity
Companies are facing difficulty in filling vacancies for reasons like lack of skilled workers and people preferring to wait out for permanent jobs instead of signing up for a temporary one. Unable to fulfill their near term requirements, a few companies, particularly from the technology sector, have resorted to freelance contractors located in other countries.  Monster.com seems well positioned to benefit from these near term requirements as it has a wide presence across more than 50 countries. Monster’s cloud based semantic search service SeeMore could be used to make resumes and job listings available across nations as it aggregates multiple databases and helps manage them from a single location.
We expect that the geographical expansion of its new tools SeeMore and PowerResume will drive their popularity and help the company regain job listings. The exclusivity of these services also means that the company can charge a premium on them, which could hurt the number of listings on the site. The high prices may prove to be a deterrent for employers but we expect that the utility of these tools will help retain their attractiveness.
The European and Asian economies are not expected to improve in the near term which could force companies located there to freeze or delay their recruiting plans. This may lead to the number of job listings declining internationally and increase the role played by North American economies, particularly the United States, in Monster’s valuation. Due to the prevalent situation, we believe that the performance of Career Services-North America will be the determining factor for Q4 results.
Restructuring to improve valuation
Monster is currently looking to sell off its under-performing business units and is looking for a buyer for ChinaHR, but most potential buyers have balked at the asking price of $10-$12 a share.  It’s also investing significantly in restructuring initiatives which have resulted in charges of ~$26 million in the current fiscal year so far. We expect that the improving employment environment, the exclusiveness of its new tools and improving margins as a result of restructuring initiatives will help raise its valuation and help it achieve its asking price.
We currently have a $7.50 Trefis price estimate for Monster, which is 30% above the current market price.Notes:
- Monster Employment Index Rises 7% Year-over-Year, Monster Worldwide, December 2012 [↩]
- The Employment Scenario, U.S. Department of Labor, December 2012 [↩]
- A Sea of Job-Seekers, but Some Companies Aren’t Getting Any Bites, The New York Times, June 2012 [↩]
- Monster Worldwide Breaks Off Talks for Private Equity Deal, Dow Jones, October 2012 [↩]