Seek Limited (ASX: SEK) shares have been on fire over the last six months, gaining around 35%. In fact, the Seek share price has had an unforgettable year – tumbling to a 52-week low in March of $11.23, before rising to an all-time high of $29.04 earlier this month.
Adding to this volatility was the short-seller attack back in October, when Seek shares plunged 10% over several days as news of the attack circulated.
Let’s take a closer look at what’s happened to the Seek share price in 2020, and what might be in store for 2021.
Seek share price under attack
In late October, a Texas-based short seller named Blue Orca Capital said Zhaopin, Seek’s Chinese job platform, was full of bogus job listings to make it appear as though there was user growth.
In a 39-page document released to the public, the short seller claimed that Zhaopin pays people to put their resumes onto the portal.
Blue Orca also claimed Zhaopin isn’t generating any organic growth, and is only relying on acquisitions for growth.
Seek owns a 63% stake in Zhaopin, which makes up 22% of the company’s total earnings before interest, tax, depreciation and amortisation (EBITDA).
The Seek share price dropped by 10% over several days following the accusation, as the company desperately tried to calm investors.
Seek requested the ASX temporarily put its shares in trading halt at the time and the company’s share price has subsequently recovered.
Seek’s results and 2021 guidance
Seek posted a net loss of $111.7 million for the year ending 30 June 2020, as the coronavirus pandemic gripped the Australian and overseas job markets.
In its annual general meeting (AGM) in November, management said that forecasting an outlook remained challenging given the ongoing uncertainty in all markets caused by COVID-19 restrictions.
Nevertheless, the company provided guidance for FY21, saying it expected revenue to be in the order of $1,600 million in FY21, and EBITDA to be in the order of $400 million.
This compares to FY20’s revenue of $1,577.4 million and EBITDA of $414.9 million.
More about the Seek business
Seek’s Australian job platform receives 30 million visits per month, and captures 90% of total time spent online searching for jobs, dominating the Australian market.
The company has 7 times as many paid advertisements as its closest competitor, and a 22% share of national job placements.
Social media networks like LinkedIn are encroaching on Seek’s market. LinkedIn currently has around 1% of the Australian job placements market.
Seek has said it’s addressing the LinkedIn threat by increasing the amount of data it retains on job searches, and using data analytics to increase the value proposition to advertisers.
The company has also made inroads overseas. In addition to Zhaopin, Seek has acquired online job sites in Brazil, Mexico, Indonesia, Thailand, Malaysia, and the Philippines.
What’s in store in 2021?
Seek’s business is highly cyclical and reacts to economic events that might undermine the job market.
This was evident when the Seek share price jumped as news of a successful vaccine was released in early November, giving a boost to the economy.
After average revenue growth of 15% for the past three years, it remains to be seen where the Seek share price might be headed in 2021, especially as Australia is arguably nearing the end of the resources boom.
Having said that, an internet service aggregator requires comparatively little capital to operate, which means that when revenue builds, the company should be able to generate higher operating margins than traditional industrial companies.
The Seek share price is currently trading at $28.64, up by 0.46% for the day so far. Based on today’s prices, the company commands a market capitalisation of around $10 billion.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
More reading
- The most crazy ASX chart of 2020
- 10 highly rated ASX shares to buy in 2021
- 2 blue chip ASX shares Warren Buffett would love
- Why Creso Pharma and these ASX shares just hit 52-week highs or better
Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. 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 Seek (ASX:SEK) share price up 35% in 6 months. Where to in 2021? appeared first on The Motley Fool Australia.
from The Motley Fool Australia https://ift.tt/34M30bB
Leave a Reply