Shareholders of Monster Worldwide Inc may have to brace for further losses if the U.S. housing slump and credit market turmoil hurt U.S. economic growth and jobs in coming months.

Shares of the parent of jobs Web site Monster.com are down 38 percent since February. Takeover talk has cooled, and a recent data breach has raised questions about legal costs and user defections. Monster's long-term outlook is solid, but the short term may be tough, analysts and investors say.

A Monster online employment index dipped in July from June, and year-over-year growth slowed from its second-quarter pace. The index, even taking into account seasonal factors, suggests slowing online recruitment in the third quarter.

We are concerned the employment market, which includes the online employment market, will deteriorate throughout the rest of 2007, said analyst James Janesky of Stifel Nicolaus.

Monster's stock has found support from speculation about a possible sale of the company, Janesky said, stemming in part from CEO Sal Iannuzzi's history as chief of Symbol Technologies, sold in January to Motorola Inc.

But this is not a good time to consider strategic alternatives, given the poor employment outlook, according to Janesky. The company might be able to get better value down the road, he said.

Monster, with a market capitalization of $4.5 billion, sells for about 18 times estimated 2008 earnings, a premium to employment services companies like Manpower Inc but a discount to Internet companies like Yahoo! Inc, whose HotJobs.com is a competitor.

The takeover premium we saw even several months ago has all but disappeared due to the weakening U.S. economy and the dearth of private equity deals, said Tim Biggam, lead option strategist at online brokerage thinkorswim in Chicago.

With the lack of takeover chatter, the stock may languish, he said. (It) certainly is not cheap.

The shares were up 2 cents at $33.89 in midday trade on the New York Stock Exchange.

DATA BREACH

Last week's disclosure of a data breach affecting at least a million users is another negative, said Darren Chervitz, research director of the Jacob Internet Fund, which has cut its Monster stake but still owns a small number of shares.

I'm sure lawyers are circling, given the fact (Monster) seems to have been a little delayed in their response, he said. This is a pretty dramatic breach (with) potential to degrade their customer loyalty.

Earnings estimates are relatively optimistic, Chervitz said. If things change for the worse in the employment market, Monster is going to feel it, and I don't think that's shown in the stock.

Sixteen analysts rate Monster a buy or outperform, while six have a neutral or hold rating. Estimates for 2007 and 2008 earnings have come down in recent weeks, after the company's weaker-than-expected second-quarter results.

Chervitz said the stock is attractive as a long-term investment, given the ongoing shift of classified ads to the Internet, a strong brand, and international expansion.

Analyst James Walden of Morningstar, who puts Monster's fair value at $46, said investors are underestimating its international potential.

As the top line grows, it's a scalable business that can expand profit margins, he said.

Walden also likes Monster's plan to fund investment in technology and marketing from cost cuts, two areas that deserve a little bit more spending, he said.

Janesky of Stifel Nicolaus, with a hold rating, said if Monster's international business were to pick up all of the U.S. slack, earnings growth would slow because of lower international margins.

Monster's Asia-Pacific strategy, including a possible increased stake in ChinaHR.com, is important over the long run, but exposure to Europe may mean that international sales will slow in tandem with the United States, Janesky said.

Do I think the stock free-falls from here? No. But the price could go down if earnings come down further, he said.

(Additional reporting by Doris Frankel in Chicago)

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