Neutral on Monster

We recently reiterated our NEUTRAL recommendation on Monster Worldwide Inc., (MWW).

With signs of a recovering economy, we expect companies to increase their recruitment via online vehicles such as The underlying secular growth rate is partly driven by the ongoing shift to online recruitment from traditional methods. The new search technology by Monster – 6Sense – continues to gain traction and should develop business in the coming months.

Monster recently acquired HotJobs from Yahoo. HotJobs is a leading online recruitment website, which was previously owned by Yahoo! Inc. The HotJobs acquisition should strengthen Monster’s position in the online job market and global recruitment resources. Along with an expanding customer base, Monster will now have access to roughly 62% of the US Internet population (130 million). Monster will also expand its newspaper partnerships from 400 to 1000 with the addition of 600 HotJobs daily and weekly newspapers providing local reach in all 50 states.

However, competition has intensified over the last few years in the online employment advertising market, which in our view has resulted in Monster losing share. While Monster once ruled the market, there are now several national-level competitors (i.e., CareerBuilder) as well as niche sites (i.e., Dice, JobsintheMoney, TheLadders, SnagAJob, etc.).

Many of the most cutting-edge recruiters have reduced their use of job boards in favor of alternative social media sites, such as LinkedIn and Twitter. Hence, Monster will need to come out with innovative and cost-efficient products on a continuous basis to gain market share.

Although revenue for second quarter was slightly short of expectations, earnings beat the Zacks Consensus Estimate, driven by cost-control activities undertaken by management. Management saw solid improvement across all key geographic regions and all sales channels. Bookings growth of 19% was better than anticipated as a result of the improved global economy.

While the impact of these positive developments will not be felt in 2010, we expect the company to return to profitability in 2011. The solid beat led to an upward revision in EPS guidance for this year. Management continues to see encouraging signs for its business this year, but not strong enough to drive solid revenue growth similar to the pre-recession levels in early 2008.

Hence, we maintain a Neutral recommendation supported by a Zacks #3 rank, which translates to a short-term rating of Hold.

MONSTER WWD INC (MWW): Free Stock Analysis Report

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