Monster (MWW) Tries to Sell Itself
PUBLISHED ON: Mar 26, 2012
Shares of Monster weathered a truly terrible 2011, when shares plunged 66%. The drop was exacerbated by LinkedIn's explosive May IPO, which instantly made it the top name in Internet job searches. Since Iannuzzi announced that Monster was exploring "strategic alternatives" on March 1, shares have recovered 50%. Shares had hit an all-time low of $6.34 per share at the end of February. Besides waiting for a potential suitor, Monster shareholders have little to cheer for. Two weeks ago, UBS downgraded the company, citing market share losses in North America and few chances of a reversal in 2012. Six weeks ago, the company announced that it would lay off 7% of its workforce, or approximately 400 employees, to cut costs. Monster has made poor attempts at striking back at LinkedIn's assault. At a Baird event, Iannuzzi made a weak claim that the two companies are in "two different sectors" of the market, and are not actually competitors. Many analysts and investors scoffed at Iannuzzi's statement, and highlighted it as another sign that the company was losing its competitive edge. While LinkedIn is classified as a social networking site and Monster as a job search engine, Monster is failing to keep up with its lesser peers, trailing in third behind first place Indeed.com and second place Careerbuilder.com.
Although LinkedIn's user base is smaller, it is actually growing at a time when Monster's user base is shrinking - a sobering fact that has kept most investors far away from Monster stock. Analysts on average believe that Monster's revenue and earnings will fall by 6% and 30% respectively in the coming year, while LinkedIn's revenue and earnings will grow respectively by 67% and 74%. Monster is also currently dwarfed by LinkedIn in market cap - Monster is currently worth $1.25 billion while LinkedIn is worth $10.18 billion. Lastly, the company has failed to effectively attract smartphone and tablet users with a decent mobile application. Currently 80% of Monster's iPad users rate its much maligned mobile application 1 out of 5 stars.
Looking forward into the first quarter of 2012, Monster expects a revenue decline between 3% to 7% from the prior year quarter's $253 million. Meanwhile earnings are expected to come in between break-even and 4 cents per share. This sorely disappointed analysts who had expected the company to post revenue of $262 million and earnings of 9 cents per share. Shares currently trade with a 5-year PEG ratio of 2.87, signaling negative to sluggish growth ahead. While an acquisition is possible, investors shouldn't pick up shares in hope of a massive buyout. Without a real offer, shares are likely to slide back to all-time lows.
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