If you are interested in adding a blue-chip ASX 200 stock to your portfolio, then it could be worth considering Seek Ltd (ASX: SEK) shares.
That's the view of analysts at Bell Potter, which remains positive on the job listings giant.
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What is the broker saying about this popular ASX 200 stock?
Bell Potter highlights that recent economic data remains mixed for SEEK, with interest rate hikes potentially causing headwinds for the company. However, data centre investments and increased discretionary spending are seen as positives. It said:
Recent Australian economic data remains mixed, with a view to an additional RBA rate hike as a headwind for jobs growth, noting some commentary that the current 4.35% cash rate may be the peak; unemployment eased to 4.5% from 4.1% across Jan-May after previously remaining tight through the rate rise cycle (+ve for cuts), GDP came in softer than expected at 0.3% for the March quarter (2.5% YoY) despite $13bn in data centre investment for the quarter (+ve), discretionary spending at+0.1% qtrly growth likely indicates a stretched consumer broadly (+ve), though we anticipate geo-political headwinds continue to flow through the energy-related inflation (-ve).
Clerical/Admin internet job ads have been the most challenged job category declining -3% in April on YoY/R3M/R6M bases and potentially reflects early AI-impact; Professionals, Managers, Technicians/Trades, Labourers, and Sales job ads all grew across the comparable periods.
Should you invest?
According to the note, Bell Potter continues to see value in the ASX 200 stock despite trimming its valuation.
This morning, the broker has retained its buy rating with a reduced price target of $18.60 (from $23.90).
Based on its current share price of $13.68, this implies potential upside of 36% for investors over the next 12 months.
In addition, an attractive 3.8% dividend yield is expected over the forecast period, boosting the total potential return to almost 40%.
Commenting on its recommendation, the broker said:
We maintain our Buy; SEK is our preferred rate-sensitive classifieds exposure looking through to a dovish RBA tilt, given the diversification in CAR and policy-impacted earnings outlook for REA.
Our Target Price is reduced to $18.60sh through earnings changes and an increase in our WACC to 10.3% (prev. 10.2%), a reduction our Growth Fund valuation via Coursera and an increase in Fund discount rate to 30% (prev. 20%) on visibility in PortCo operating performance in an AI-enabled environment. SEK's underlying proprietary data (~750m points per day) partially consists of traffic meta data which is unable to be scraped by third parties, is valuable for targeted job placements, should support yield through soft volume environments.
