The shares of Australia-based HR consulting company SEEK Limited (AU:SEK) went under pressure yesterday after it released its trading and guidance update. The company reduced its revenues for the fiscal year 2023, pulled down by lower job ad volumes.
The company also issued an investor day presentation, highlighting the long-term value addition over the next five years.
The shares recovered and are trading up by 3.79% today. YTD, the shares have soared by more than 22%.
SEEK is the leading marketplace for online employment in Australia and also provides services like advertising jobs, banner ads, CV writing, training, etc. The company has operations in 10 countries across Asia, the Pacific, and Latin America.
Let’s delve into more details.
Trading and Guidance Update – Lower Revenues
The company reduced its revenue guidance by AU$15 million as it witnessed lower ad volumes and revenues in its third quarter.
For the fiscal year 2023, SEEK expects to generate revenues of AU$1.25 billion, as compared to the AU$1.26 billion stated earlier with half-year results.
The company maintained its guidance for EBITDA at AU$560 million and NPAT at AU$250 million. It expects the lower operating expenditures will help offset the declining top-line growth and achieve its earnings guidance.
The Longer-Term View: Betting Big on APAC
SEEK outlined its long-term vision as part of its strategy update, which was also released yesterday.
The company faces lower job ads due to recessionary pressures and higher unemployment. However, it is upbeat on the Asian markets, where it expects to post growth riding on bigger online ad penetration.
In Asia, the company has a robust presence, with a monthly average of 17 million unique visitors and a monthly paid ad volume of 241k.
It also stated that the total addressable recruitment pool is around AU$35 billion, which is further expected to grow at 5% annually over the next five years. The management is eyeing AU$2 billion in revenues by the fiscal year 2028, which reflects a huge growth of 60% over 2023 numbers.
Analysts’ Opinion
SEK stock has mixed opinions from analysts with an overall bullish outlook.
Analysts at Macquarie have upgraded their Buy rating on the stock, based on long-term revenue goals. The broker has a price target of AU$32.5, which represents a growth of more than 30% on the current price.
Goldman Sachs analysts Kane Hannan, Chris Gawler, and the team have different opinions and have confirmed their Sell rating on the stock. The price target of AU$22.30 is 10.76% lower than the current level.
Hannan believes the company has many factors driving its earnings lower in the short term, including the economic cycle impacting the labor market and fewer job applicants.
Goldman has a revenue estimate of AU$1.83 billion for the next five years, lower than the company’s target of AU$2 billion.
Is SEEK Stock a Buy?
According to TipRanks, SEK stock has a Moderate Buy rating based on six Buy, one Hold, and one Sell recommendations.
The average target price of AU$28.37 suggests an upside of 13.53% on the current trading level.
Ending Notes
SEEK is positive about its long-term goals, with huge growth opportunities ahead in the Asian markets. Analysts, on the other hand, remain divided and are also concerned about the lower earnings in 2023.
Overall, the stock has a Moderate Buy rating on TipRanks.
