Friday, September 29, 2006

Calls of Note Part 4

- Wachovia comments on Monster Worldwide (NASDAQ:MNST) saying that when they assumed coverage of MNST on 8/22/06 they thought the deceleration in the overall U.S. help wanted ad market could continue, potentially more quickly than anticipated. Exiting 3Q, it appears that their employment ad thesis is playing out, and they believe data is pointing to continued deceleration in job posting growth. Therefore, the firm is modestly lowering their estimates for 4Q06 and 2006 to $0.33 and $1.19 (guidance of $1.17 - $1.22), from $0.34 and $1.20 respectively, and are maintaining Market Perform rating.

Help wanted ad revenues for co.'s fell 2.3 % in 2Q but declined sequentially by 6.4% and 7.8% in July and August, and channel checks and posting counts imply continued deceleration in Sept. Importantly, while they think the secular shift of employment revenues from print to the Internet is intact, they also believe the online segment is also beginning to slow, supported by online posting counts.

Firm's staffing firm online counts showed y/y posting growth slowing as well, from the high teens in early 3Q to the mid to high single digits in Sept.

Valuation Range: $38 to $40

Notablecalls: So now we know why MNST took that big hit on Monday. Would not be surprised to see some additional weakness over the coming weeks. The shares are not expensive but nor are they cheap. Trading around their growth rate that seems to be slowing.

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