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?
The post Is the SEEK (ASX:SEK) share price in the buy zone? appeared first on The Motley Fool Australia. –

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.”

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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.

The post Is the SEEK (ASX:SEK) share price in the buy zone? appeared first on The Motley Fool Australia.

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