Is the SEEK (ASX:SEK) share price in the buy zone?

The SEEK Limited (ASX:SEK) share price was a strong performer on Tuesday and hit a record high. Is it too late to invest?

| More on:
A woman with black afro hair and wearing a white t-shirt shrugs and purses her lips

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The SEEK Limited (ASX: SEK) share price was on form again on Tuesday.

The job listings giant's shares jumped 7% at one stage to reach a record high of $32.92 before closing the day at $31.30.

Why did the SEEK share price hit a record high?

Investors were scrambling to buy the company's shares yesterday following the release of an update.

That update revealed that all conditions precedent to completion of the Zhaopin transaction have been satisfied. Following its selldown, management intends to return some of the proceeds to shareholders via a 20 cents per share special dividend.

In addition to this, SEEK revealed that its performance has been stronger than expected in FY 2021. As a result, it has upgraded its guidance.

It now expects revenue of ~$1,740 million and EBITDA of ~$510 million in FY 2021. This compares to previous guidance of ~$1,700 million and ~$510 million, respectively.

And on the bottom line, SEEK's reported net profit after tax is expected to be $150 million. This is up from $100 million previously.

Is it too late to invest?

Analysts at Goldman Sachs believe it could be too late to invest and feel its shares are fully valued at the current level.

According to a note, the broker has retained its neutral rating but lifted its price target by 11% to $30.40.

Based on the current SEEK share price, this implies potential downside of approximately 3% over the next 12 months.

What did Goldman say?

Goldman Sachs was pleased with SEEK's update and its stronger than expected guidance upgrade.

It said: "SEK is experiencing significant leverage to the strong ANZ economic recovery, from both improving volumes, but also the resulting increased yield per listing due to dynamic pricing. This is not entirely unexpected, and we had expected a guidance upgrade given strong recent ANZ data points. However, we had also expected increased investment, mitigating the size of the EBITDA upgrade. We are also pleased to see the stronger revenues/commentary around Asia, given this segment delivered what we viewed as a particularly soft 1H21 result."

However, it believes that there are better ways for investors to benefit from the ANZ economic recovery – News Corporation (ASX: NWS) and Nine Entertainment Co Holdings Ltd (ASX: NEC).

It explained: "Overall we revise our SEK earnings estimates to reflect the stronger underlying result (i.e. EBITDA +5% / +7% / +10% in FY21-23E), but also incorporating the Zhaopin sell down. As a result our SEK EBITDA declines -1%/ -23%/ -20% in FY21-23E, but NPAT increases +11% /+5% /+10%. Our SEK TP increases +11% to A$30.40, reflecting the earnings upgrades & higher ESV value. We stay Neutral on SEK, as although it is delivering strong earnings' momentum, we attribute the majority of this to the broader macro recovery, and would prefer play this through News Corporation or Nine."

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »