Seek Ltd (ASX: SEK) shares are a popular option for Aussie investors and feature in countless portfolios and self-managed superannuation funds (SMSFs).
But are they a good option at present? Let's see what Bell Potter is saying about the ASX 200 share after it declined almost 60% over the past 12 months.
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What is the broker saying?
Bell Potter highlights that there was a decline in job ads in August. And with the Reserve Bank of Australia (RBA) suggesting that unemployment needs to rise to combat inflation, the broker has concerns over Seek's outlook. It said:
SEK's job ad volume index for August has outlined a -5.3% decline YoY, which compares against the counted stock from the ANZIndeed Index increase of +7.8%. The Internet Vacancy Index (IVI) August print, which is a direct comparison of job ads to SEK's index as a measure of volume flow, is released Wednesday 23 rd Sep; NAB's Economics and Markets Research team is anticipating a slight rise in employment by +20k and a fall in unemployment to 4.4% at the ABS August labour force release on Thursday 24th Sep, which appears in-line with RBA governor Michelle Bullock's recent commentary around higher unemployment as a lever to reduce inflation, targeting between 4.5% to 5.0%, having previously attempted to protect job gains.
After looking through recent job ad data, Bell Potter has reduced its estimates for volumes and earnings per share. It explains:
A significant divergence is opening between industry job ad flow YoY; the largest decline was Government & Defence (-20.3%), likely a response to recent political and budget pressures, followed by -14.1% for Education and Training and -13.7% for Real Estate and Property. These are being somewhat offset by +14.3% in Engineering, 11.6% in Mining, Resources & Energy, and +10.7% in Construction, understandably driven by the commodities cycle and data centre/AI build out.
AI-related skill demand grew 3.9% MoM and 66.2% YoY; jobs with a higher automation risk declined -12.3% YoY in August compared with medium at -6.1% and low -1.8%. We reduce our volumes expectations to -2% (prev. flat) in both ANZ and Asia for FY28, reflecting the increasingly global hawkish backdrop and in-line with extending expectations to bring inflation back to target ranges. Net impact to EPS is downgrades of -7% in FY28e and -7% in FY29e.
Should you buy this ASX 200 share?
According to the note, the broker has retained its hold rating on the ASX 200 share with a trimmed price target of $13.00 (from $13.80).
Based on its current share price of $12.11, this implies potential upside of approximately 7%.
Commenting on its recommendation, Bell Potter said:
We await a positive shift in sentiment or visibility on jobs volumes recovery; potential near term Growth Fund monetisation remains an asymmetric upside risk, though the rising interest rate backdrop may also be an additional headwind in seeking a desired exit price for nominated assets. SEK appears to be improving operations to sustainably target 10% yield growth on top of strong cost controls, however, despite trading at deep value ex. Growth Fund, macro-based headwinds suggest difficult sentiment near-term for the stock. Maintain Hold.
