The SEEK Limited (ASX: SEK) share price has come under pressure on Monday morning.
At the time of writing, the job listings giant's shares are down 5.5% to $29.81.
Why is the SEEK share price under pressure?
The weakness in the SEEK share price appears to have been driven by a broker note out of Goldman Sachs this morning.
According to the note, the broker has downgraded SEEK's shares to a sell rating but with an improved price target of $30.80.
This price target implies potential downside of 2.5% from its last close price.
What did Goldman say?
Goldman Sachs has been looking at the industry and has adjusted its earnings estimates to reflect strong macro tailwinds.
And while the broker believes SEEK will outperform its guidance in FY 2021, with EBITDA of $498 million compared to its guidance of ~$480 million, it feels the market is too optimistic on the future.
Goldman also has concerns with its valuation and believes it screens unfavourably due to domestic and global peer valuations, historical multiples, and its preference for value shares over growth.
The broker explained: "SEEK is delivering robust near-term earnings momentum, benefiting from the strong post-covid employment recovery and tightness in the labour market, which looks likely to continue into FY22E. However, when considering Visible Alpha consensus earnings, we believe that FY23E forecasts are overly optimistic. When combined with elevated trading multiples and the ongoing value vs. growth trade (with our strategists preferring value), we downgrade SEEK to Sell."
What would make the broker more positive?
Goldman acknowledges that there are several upside risks to its bearish view on the SEEK share price.
This includes stronger than expected yield tailwinds from its introduction of dynamic pricing and the labour market staying tighter for longer. It also notes that its strategic review could provide greater valuation support, as could greater than expected margin improvement across the Asia-Pacific business.
But until it sees sign of these or the SEEK share price pulls back to a more attractive level, Goldman is sticking with its sell rating.
