Key Reasons We Revised Our Price Estimate For Monster To $5

We recently revised Monster Worldwide’s (NASDAQ:MWW) stock price estimate from $6.60 to $5 on the basis of its lower than expected 2015 full year results and our slightly reduced growth expectations for the company. The most important factors driving down our price estimate for Monster’s stock were our reduced forecasts for Monster’s expected EBITDA margins in its key segments – North America Career Services and International Career Services.

We had previously expected the company to continue to expand its Career Services EBITDA margins in 2016 – both in North America and International markets – considering that Monster’s North America and International Career Services EBITDA margins (adjusted for share based compensation, restructuring costs, some special charges and goodwill) improved by about 470 basis points and 120 basis points in full year 2015, respectively. However, in its latest earnings call, Monster’s management stated that it was shifting its strategy from cutting costs and expanding margins to improving its top line this year. The company had guided towards 5% revenue growth for 2016 last year and a substantially lower EBITDA margin of 25% by the end of 2016. However, owing to a weak market environment and demand uncertainty, Monster revised its guidance to low to mid single-digit revenue growth for the year.

A consistent increase in overall EBITDA margins over the next 2-3 years was a significant contributor to our earlier $600 million valuation for Monster, which has now been revised to $444 million, primarily owing to lower than expected growth in this metric.