Monster Worldwide: Time To Rebound
Ashish is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Monster Worldwide Inc. (NYSE: MWW) has lost ~45 % of its market cap in the last year. The stock is currently trading at around $7.50, and we believe the company is both undervalued at these levels and poised for a rebound. Our bullish thesis is based on the company’s gaining innovations, growth opportunities in international markets, and its potential chances of getting acquired. Here’s a look at these points in more detail.
Technology continues to gain traction: Monster's 6Sense semantic search technology powers products like Power Resume Search and helps recruiters to find the best candidates quicker by analyzing resumes in seconds instead of hours. It is based on semantics and language rather than keyword searches, making it a much more powerful and accurate tool. Kforce Inc. (NASDAQ: KFRC) recently entered into a multi-year agreement with Monster to deploy the company's Power Resume Search across the organization. Kforce, a recruitment and staffing solutions firm, will now be providing 6Sense technology to its entire user base for all their sourcing needs on Monster.com. With this, Kforce entered a growing list of companies that are deploying the Monster 6Sense technology to enhance their recruitment processes by making precise talent matches. As 6Sense continues to gain traction in the recruitment market we expect it to deliver significant revenue contributions in the long term.
Another success for Monster has been its Career Advertising Network (CAN). CAN grew 35% in 2011 and comprises 8% of North American bookings and 5% of Global Careers. This is a premium value offering that helps recruiters address difficult-to-fill positions through “passive candidates” in a fast manner.
International growth: The online career advertising market is still in early states in many emerging and developing markets. Monster, as one of the top players in these markets, is likely to be a big beneficiary from increasing online penetration. Although much of the shift of job advertising from print media to the web has already occurred in dense urban areas in emerging/developing countries, the shift among semi-urban/rural areas in these developing markets is on-going. Although there is much speculation and fear about LinkedIn (NYSE: LNKD) capturing the market share of Monster in the international markets, we believe both companies can coexist. While LinkedIn, being a professional network, offers opportunities to passive candidates (mostly high end) who already have jobs, Monster offers diverse jobs for active job hunters. We believe that the opportunity in the international markets can help monster drive its revenues higher in the long term.
Good likelihood of acquisition: Monster’s CEO has said that he is open to sell all or a part of the company to potential buyers, including PE firms, technology companies or large investors. Even if LinkedIn gives monster a miss, there are still a lot of potential buyers in the market. Monster is using the services of Stone Key Partners and Bank of America Merrill Lynch to review the strategic alternatives. We see a good possibility of Monster’s acquisition going forward given its low stock price and a huge user base.
To sum up, Monster's business model has low capital requirements and potential to generate high incremental margins. As Monster’s new technologies gain traction and it looks to capitalize on the market opportunities in the developing markets through its established base, we expect the stock price to rise. On top of this, the company has a huge user base and there is a good possibility of acquisition given the company's low valuation.
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