New trade: Long Ebay(EBAY) – Short Monster (MWW)

By: ispeculatornew
Date posted: 12.07.2009 (5:00 am) | Write a Comment  (2 Comments)

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monsterAfter closing my trade on Priceline/Travelzoo Friday morning, I was now ready to take on a new one. I was looking at the two dozen companies that I currently screen through. One name that I wanted to look more into was Monster.com (MWW), which as many of you probably know makes money by charging employers money to either publish job offers or give up details of potential candidates. Even though the employment report on Friday was very strong and encouraging, I continue to believe that this is a very difficult to compete with. Many local and specialised websites have continued to grab market share in a market that is not exactly exhibiting strong growth in these difficult economic times.

What was surprising to me was that despite Monster showing negative revenue growth for the past few quarters, it continues to trade at a rather high valuation.

Another company that I consider to be in a similar environment is Ebay. In the auction/listings market, Ebay has long been the target of many smaller, free websites. That is of course what explains Ebay’s slim growth and gloomy prospects. I have written about Ebay’s ebayunder-use of its Paypal unit quite a few times and in recent weeks I have started hearing ideas and plans for the lucrative unit that continues to dominate the web. That is very encouraging and I believe that Ebay can at least slow down its decline and maybe generate a few new revenue sources that can change the entire picture.

I’m simply not as convinced that Monster can pull off the same and have not heard much in terms of plans. Take a look at these graphs from Google

Monster revenue/profits:

chart

Ebay’s not spectacular but still much better numbers:

chart2

And now for the graphs:

mww

ebay

And yet Monster continues to trade at a much higher P/E ratio, something I truly do not understand. Therefore, I am ready to enter into this new trade between two companies that have many similar characteristics but Ebay has many more options to get back into a “higher growth” phase. Will Monster’s long term prospects be tough? Maybe not. But the current economic conditions will offer many challenges to Monster for the short to medium term.

Disclaimer: No return is guaranteed and each recommendation should be considered within the investor’s individual situation. As with any financial investment, there are risks involved.

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2 Comments

  1. Comment by PA — December 7, 2009 @ 2:44 pm

    With you on MWW, job market numbers look ‘less bad’ and this stock shoots up more than 10%?? Employment number getting better or not, they know how THEIR business is doing and they guided down. Added to shorts today, won’t mind adding around 18.5$ but am holding until it gets down to ~14$. Let’s see.

  2. Comment by IS — December 10, 2009 @ 8:16 am

    Here were the opening prices for these trades, the opening prices on Monday:

    EBAY: 23.54
    MWW: 16.66

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