The growing signs of weaker employment growth are not a good sign for media stocks. Deutsche has a note that ANZ’s job ad market series has fallen, which does not augur well for media stocks:
In Aug-12 the online job ads fell by 2.1% mom and 9.0% yoy to 153k ads, the 12th consecutive month of yoy declines since Sep‐11. Whilst the high single digit rate of decline recorded in the SEK New job ads index and ANZ Job Index highlight that the ad slowdown is continuing into FY13, SEK indicated it is not seeing the same level of decline replicated in the company’s July ad volumes with only a moderate decline as lower new job volumes are offset by churn and refreshed ads. As such we do not expect job ad volumes to replicate the dramatic decline witnessed during the GFC (130k job ads). On this basis we expect FY13E SEEK’s domestic volume to decline by 4% consistent with the – 4% run rate recorded in the Jun-12 half.
JP Morgan has an underweight recommendation on Seek, for similar reasons:
Lead indicator 1) Slowing Mining Emp volume (c.8-9% vol) – Recent data points indicate Regional QLD (a strong contributor to Australia’s job growth over the last 5 years) is slowing. We have seen 1) APN’s QLD Emp rev decline -15% in July/Aug 2) Prime Media highlight a ‘soft trading environment in regional QLD’ & 3) Management feedback from co’s in the area (i.e SXL) indicate a slowing in employment advertising.
Seek’s market cap is $2.4 billion, which is well over twice Fairfax’s market cap. With ads weakening it suggests there is some extreme volatility in the sector to come.