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51 Jobs is
scheduled to report third quarter 2008 results before the market
opens on Friday, November 14. Based on our analysis, we at
eChristianInvesting are expecting JOBS to report
disappointing results that fail to meet Wall Street’s consensus
expectations.
Analyst
Expectations
We are
forecasting revenues of $30.0 million and EPS of $.10. This
would represent a 2% increase in revenues from last year’s $29.4
million in the same period. The current analyst consensus calls
for revenues of $30.7 million and $.11 EPS. On August 6, the
company provided third quarter guidance for revenues of $29.9 –
31.3 million and $.11 - .14 EPS.
The
Chinese economy is certainly feeling the effects of the global
recession, although how much of an impact it will have remains
to be seen. Slowing GDP growth has already had an impact on 51
Job’s business and we expect a disappointing quarter based on
the following assumptions:
-
The
Beijing Olympic Games had a negative impact on the
recruitment behavior of hiring companies in China.
-
Monster commented on its quarterly call that the Chinese
market and their China HR business were now feeling the
effects of the global slowdown.
-
Traffic and job posting performance declined as public
interest in the Olympic Games reduced job search.
Share
Performance
To date,
51 Job’s shares have fallen 64%. By comparison, the Dow Jones
industrial average has fallen 37% this year, and the Standard &
Poor's 500-stock index is down 42%.
Valuation
Shares are
now trading at 11x consensus 2009 EPS estimates. This is inline
with the relative valuations of their peer group. 51 Jobs is
currently trading at the bottom of its 52-week range and at a
relatively low valuation multiple. In addition, the company has
over $5 per share in cash on its balance sheet with no debt. So
while the macroeconomic pressures will continue to weigh on the
company, we see limited downside provided the environment
doesn’t deteriorate to the level where the company starts losing
money.
Recommendation:
Hold with a $7 price target.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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