The market may be climbing higher on Friday, but the SEEK Limited (ASX: SEK) share price hasn't been able to do the same.
In morning trade the job listings company's shares dropped almost 3% to $16.90 at one stage before recovering slightly.
At the time of writing the SEEK share price is down over 1.5% to $17.08, stretching its 12-month decline to 10%.
Why are SEEK's shares underperforming?
Today's decline could be attributable to a broker note out of Morgan Stanley this morning.
Although the broker remains bullish on SEEK and has an overweight rating on its shares, it has cut the price target on them by approximately 2.5% to $20.50. This price target still implies potential upside of close to 20% for its shares over the next 12 months.
Why are they down 10% in 12 months?
SEEK's overall weakness over the last 12 months has largely been down to its guidance for FY 2019. Although the company expects to deliver strong revenue growth in the range of 16% to 18% this year, it has guided to flat net profit after tax.
With its shares trading at 27x earnings, the lack of bottom line growth has unsurprisingly led to some investors selling shares.
While I can understand why they may have done this, I would argue that it is well worth sticking with SEEK.
The reason that earnings are expected to be flat this year is because management is investing heavily in its future growth. I believe this is a good move and would suggest investors deal with the short term pain in exchange for the potential long term gain.
After all, SEEK has a talented management team that has a long history of creating wealth for shareholders.
Overall, I think SEEK is a great buy and hold option for patient investors along with fellow online listings companies Carsales.Com Ltd (ASX: CAR) and REA Group Limited (ASX: REA)
