Hudson Global's Strong Performance In Q4 Shows Resiliency Of Recruitment Process Outsourcing Model, Analyst Says

  • EF Hutton analyst Edward Reily reiterated a Buy rating on the shares of Hudson Global Inc HSON with a price target of $42.50.
  • The company's Q4 FY22 adjusted net revenue declined 0.7% Y/Y and increased 4.8% on a constant currency basis, despite the challenging labor market within the U.S. tech sector.
  • The analyst said Hudson's clients have high switching costs due to Hudson's employees being deeply embedded in their operations, often working alongside clients' employees.
  • More than 50% of its current client base is defensive, in the healthcare and financial services industries where employment has increased or not declined as much as the national averages in most recent recessions, and customer retention traditionally has been very high, the analyst noted.
  • The analyst opined that the market misunderstands the recruitment process outsourcing (RPO) business model which has several key differences from traditional recruiting and staffing models that make it more appealing.
  • Despite the current macro environment, the analyst thinks Hudson will continue to win new business.
  • Pricing of contracts is largely tied to labor prices, which the analyst believes will be a positive driver of organic growth going forward.
  • Hudson is seeing strength in the life sciences, pharmaceuticals, and medical device fields, which tend to hold up relatively well during times of economic stress relative to other sectors.
  • The analyst anticipates revenue to ramp throughout the year, with the 1Q23 being roughly in line with results from 4Q22.
  • Price Action: HSON shares are trading higher by 1.80% at $22.00 on the last check Friday.


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