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Monster is
scheduled to report third quarter 2008 results after the market
closes on Thursday, October 30. Based on our analysis, we at
eChristianInvesting are expecting MNST to report
disappointing results that fail to meet Wall Street’s consensus
expectations.
Analyst
Expectations
We are
forecasting revenues of $332 million and EPS of $.34. This would
represent a slight decrease in revenues from last year’s $337.1
million in the same period. The current analyst consensus calls
for revenues of $337.2 million and $.33 EPS. The company no
longer gives guidance.
While we
do not expect Great Depression-like unemployment rates of 25%,
we are expecting unemployment to approach double-digits for the
first time since the early 1980’s. Monster and the other online
recruitment players have not existed in an era of high
unemployment and it remains to be seen how big of an impact it
will have on their business model. Clearly, customers will be
reducing their recruitment spend as they cut back on hiring and
even look to reduce their staffing levels.
Share
Performance
To date,
Monster’s shares have dropped over 68%. Meanwhile, the NASDAQ
has only fallen 41%. The company’s share performance has really
dropped over the last two months as poor economic news and
rising unemployment rates foretell a lack of demand for their
services.
Valuation
Shares are
now trading at 7x consensus 2009 EPS estimates. While this
valuation appears to be cheap compared to their peer group, we
expect analyst estimates to continue to be revised downward as
the unemployment rate rises.
Recommendation:
Hold with a $10 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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