Monster (NYSE:MWW) will report its Q2 2012 earnings on August 2. In the first quarter of 2012, it saw an overall decline in its revenues due to a drastic drop in Internet advertising revenues from $33 million to $19 million year-over-year. Global Career Services business revenues showed only a marginal decline of 2% year-over-year. It also reported an operating loss of around $10.2 million. Expenses related to its restructuring efforts were largely responsible for the operating loss. Monster has seen increased competition from social job networks like LinkedIn (NYSE:LNKD) and now even Facebook (NASDAQ:FB). It will have to focus its resources wisely to continue being a top player in the job search market going forward.
Macroeconomic outlook doesn’t inspire confidence
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Going forward, the macroeconomic outlook looks bleak for the rest of the year. Our expectations in the previous quarter about job recoveries haven’t materialized. With the Eurozone countries unable to come to grips with their problems, a comprehensive solution to the debt crisis doesn’t seem in sight in the near term. The slowdown is Europe is therefore expected to continue.
Asian giants India and China aren’t doing very well either and growth is slowing. This is due to a combination of the spreading contagion from Europe and a number of domestic factors. The employment numbers in the US also haven’t shown a significant improvement and rumors floating around about QE3 in the coming months at least demonstrate that market watchers are worried. These considerations lead us to conclude that Monster’s North American and International Career Services businesses will remain largely flat or show marginal decline. We would like to hear whether Monster management shares our pessimistic outlook.
Competitive landscape may just get tougher
Previously, Monster faced a threat largely from from LinkedIn, which is the largest social job network globally by Internet traffic. In response the company had launched social applications like BeKnown to leverage Facebook’s social platform and massive reach, which could help it compete with LinkedIn. But now, Facebook has apparently decided that it wants a share of the job search market for itself. There have been persistent speculations that BranchOut, Jobvite and Work4Labs will be at least three of the companies that will pair with the platform. The Facebook job board could go live as early as August. Given Facebook’s ability to cause job listings to go viral by making them appear in news feeds and encouraging users to share/re-post the same on other users’ walls, competition may stand little chance. Facebook might well turn out to be the elephant in the room. This would drive traffic away from LinkedIn and Monster thus eating into advertising revenues to begin with. It will be interesting to hear what comments Monster has to offer on this development and how they plan to counter it.
We have a $10 Trefis price estimate for Monster, which stands around 30% above its current market price. Career Services in North America and international markets account for most of its value.