Thursday, June 21, 2007

Monster Worldwide (NASDAQ:MNST): Citigroup reits Buy

- Citigroup takes another stab at Monster Worldwide (NASDAQ:MNST) noting the shares have traded off approximately 11% since June 1st, and the stock has recently been trading as if the June Q is going to be a Miss & Lower quarter. Admittedly, given the new management team there may be a re-setting of the guidance bar, but their read of intra-quarter datapoints does not indicate a Miss quarter. Citi thinks Street estimates are reasonable and believes MNST remains a Buy right here. And were MNST to report an In-Line quarter but trim down guidance, they would attribute that largely to understandable conservatism of a new management team.

Citi notes that through 12 weeks of the quarter, MNST's QTD Y/Y job postings growth in the U.S. is tracking modestly ahead of last quarter's 14% Y/Y growth. They are tracking 15% Y/Y growth through June 17th. The key point here is that their revenue estimate assumes a material deceleration in North American recruitment advertising (55% of MNST's total revenue) from 15.0% Y/Y growth in the March quarter to 10.8% Y/Y growth in the June quarter to $180MM. But listings tracking doesn't indicate this level of deceleration. In terms of MNST's other segments, the firm believes estimates already assume reasonable deceleration.

And their Long-Term Thesis Remains Intact: 1) Secular migration of Help Wanted advertising online; 2) MNST remains #1 or #2 in almost every key geo market; 3) European leverage opportunity drives a strong EPS growth outlook; 4) Greater likelihood of share buybacks;

Reits Buy and $53 tgt, especially with the stock now trading at a U.S. radio or newspaper sector multiple of 10.8X EV/EBITDA, they believe valuation risk here is highly limited.

Notablecalls: MNST is down substantially since I highlighted it as a potential short on June 7. I think kudos goes to Baird for their excellent comments saying it is possible that estimates or full-year guidance can be revised by the new management. Looks like the market has been gradually pricing in that risk over the past couple of weeks.

While Citi's call makes some sense, looking at the chart I see very little reason to buy the stock here. I want to see some bottoming action first. An early sell-off, followed by a recovery towards the close is something that would get my attention.

I suspect that eventually MNST will be sold. I just don't think it's going to happen in the next 6 months.

No comments: