Monster’s Business Could Turnaround In The Coming Future
Monster Worldwide’s (NASDAQ:MWW) business is forecast to turnaround in the coming quarters, with expectations of a sequential rise in revenue starting the third quarter of 2015. The increased demand will be led by growth in North America and the APAC region; while European results could continue to see macro-economic and competitive challenges in the near-term. The company’s recent results demonstrate that Monster’s new products and strategies are gaining ground and have accelerated its engagement among both members and employers. In addition to improved top-line growth, the company’s profitability is also expected to rise in the coming quarters, as the recent cost cutting measures are yielding results. Based on these factors, we have changed the price estimate for Monster’s stock to $7.40.
See our complete analysis for Monster
- Monster Pushes For Shareholder Approval Of Randstad Deal As Q3 Results Slide
- What To Expect From Monster’s Q3 Results
- Monster Expecting 14% Top Line Decline In Q3; Randstad Deal On Track
- Decoding Monster’s $3.40 Acquisition Price: Is A Failed Turnaround Implied In The Price?
- Monster’s Revenue, EPS Misses Estimates Amidst Acquisition News
- What To Expect From Monster’s Q2 Results
Future Growth Will Be Driven By North American And APAC Region; European Results Could See Protracted Challenges During 2015
Monster’s management expects top-line growth to pick up in the North American region during the coming quarters — Careers-North America segment is expected to see revenue growth of around 2% to 4% sequentially (or flat growth in year-over-year terms) during Q3 2015. Thereafter, the revenue could rise in year-over-year terms in the fourth quarter of 2015. The recent bookings growth of 7% within the North American segment during Q2 2015 implies that Monster’s traditional and new products are gaining traction among customers within the region. [1] This also bodes well for future growth in other international geographies as new products are initially rolled out within North America, and then subsequently launched in other geographies. Future demand could indeed accelerate in the international region, following the trends in the North American market.
Robust demand in the APAC region is further expected to fuel results for the company in the near future. During Q2 2015, revenue from the region saw 11% sequential and 13% year-to-year growth in constant currency terms. [2] However, APAC revenue could see short-term pressure during Q3 2015, owing to seasonality issues in the Korean market. In contrast to APAC region, the European market continues to be beset by various macroeconomic and competitive challenges. In constant currency terms, the company’s European revenue fell by 5% sequentially and 1% annually during Q2 2015. While the same trend is expected to persist in the near-term, European region could also return to sequential growth in revenue during Q4 2015.
Monster’s Profitability Is Forecast To Improve In The Coming Quarters, Helped By Cost Cutting Measures
Monster’s cost cutting measures, which involve workforce reduction by around 300 positions, are on track to completion, with certain actions still to be concluded within Europe. These measures have started to yield results — during Q2 2015, Monster’s EBITDA margin rose by 150 basis points sequentially to 16.1%. Moreover, the company targets an EBITDA margin of 18-22% by Q4 2015. We believe the recent improvement in profitability, coupled with revenue growth could lead to operating leverage in the future. This will potentially lead to considerable increase in EBITDA margins over the coming years.
Growth Strategies Are Paying Off
In another encouraging sign, Monster’s growth strategies continue to gain traction in the market. Its “all the jobs, all the people” strategy is gaining ground as monthly job postings crossed 4 million mark recently as compared to 250,000 jobs in early 2014. This contributed to 20% sequential increase in Monster’s membership during Q2 2015.
In addition, Monster’s job advertising products saw healthy growth in the recent past, underlying increased demand for both classic as well as newer social ads products. Similarly, Talent CRM and TalentBin have gained high acceptance among customers, and are helping drive the recovery for Monster.
Our $7.40 price estimate for Monster’s stock, is marginally below the current market price.
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
Notes:- Monster Worldwide’s (MWW) CEO Tim Yates on Q2 2015 Results – Earnings Call Transcript, Seeking Alpha, July 30, 2015 [↩]
- Monster Worldwide’s (MWW) CEO Tim Yates on Q2 2015 Results – Earnings Call Transcript , Seeking Alpha, July 30, 2015 [↩]