The SEEK Limited (ASX: SEK) share price was out of form on Friday.
The job listings giant’s shares ended the day 4% lower at $28.31.
This means the SEEK share price is now down almost 14% since the start of the year.
Why did the SEEK share price tumble today?
The catalyst for this weakness in the SEEK share price today appears to have been a broker note out of Goldman Sachs this morning.
According to the note, the broker has retained its sell rating and cut its price target on the company’s shares by 15% to $27.30.
Following today’s decline, this implies potential downside of 3.5% for its shares.
What did the broker say?
Goldman is expecting SEEK to deliver a strong result later this month, but not one that achieves the market consensus estimate.
It said: “We expect a strong result from SEK, with 1H22 Rev/EBITDA of $483mn/$223mn, driven by +56%/+58% growth in ANZ Rev/EBITDA. However despite this strong growth, our SEK Rev/EBITDA estimates sit -3% below VA Consensus.”
In addition, the broker has adjusted its price target to reflect changes to valuation multiples in line with other classifieds peers and a discount to the valuation of its Seek Growth Fund business.
It made the move on the latter following industry feedback which suggests valuation pressure on venture capital assets. Goldman highlighted a recent de-rating of Bailador Technology Investments Ltd (ASX: BTI) as proof of this.
The broker explained: “Consistent with global classifieds (and peer REA) we lower our EV/EBITDA valuation multiples 3X within our SOTP (except for Latam).”
“We also introduce a 20% discount to SEK growth fund carrying value, reflecting: (1) peer BTI.AX de-rating (c.25% decline since Oct levels when SEK last provided an ESV valuation); and (2) industry commentary suggesting valuation pressure on VC assets in Australia. Overall our SOTP-based TP decreases by c.15% to $27.30,” it concluded.
The post SEEK (ASX:SEK) share price tumbles on broker sell rating. Here’s why it is bearish appeared first on The Motley Fool Australia.
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More reading
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Motley Fool contributor James Mickleboro owns SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bailador Technology Investments Limited. The Motley Fool Australia has recommended Bailador Technology Investments Limited and SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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