Analysts at investment bank JP Morgan have run the ruler over SEEK Limited (ASX: SEK) as the operator of multiple international jobs advertising websites and today come up with a bullish $20 share price target.
SEEK is the operator of the eponymous market-leading jobs website in Australia, but now earns around 60 per cent of its revenues and half its profits via its full or part ownership of overseas jobs websites.
Its Australian operations have a strong track record of growth as it invests in technology, product development, and building the network effect that attracts the most paying advertisers (employers) and job seekers.
The crown jewel in the global business is its Chinese doppelgänger Zhaopin.com that is now a market leader in the giant Chinese jobs market and growing at a breakneck pace.
In fact Zhaopin scrip is changing hands on the NYSE for 30 per cent more than this time last year, although the business is soon to go private again as SEEK and its private equity partners look to leverage their return on investments.
SEEK also owns websites across South East Asia, Mexico and Brazil, with the economy and employment cycle of the latter at a bottom with little room to worsen from here.
Overall, I expect SEEK's international growth prospects and its investments in product development have impressed the analysts at JPM who put an "overweight" rating on the stock.
Competition
SEEK faces a competitive threat from U.S. jobs and workplace social network LinkedIn that is developing its Talent Solutions jobs advertising segment.
SEEK though still boasts it offers a superior return on investment (than LinkedIn) to the majority of employers via its pricing and "jobs board" approach, compared to LinkedIn's cost per click, send, or impression pricing methodology.
It's also possible that LinkedIn and SEEK could work together in the future, or that both are able to deliver sustained growth to investors amidst a giant global jobs advertising market that covers the entire employment spectrum. LinkedIn for example has a blue-collar focus, while the majority of jobs globally are not in this sector at all.
Still, SEEK shares look on the expensive side at $17.60 given its actual growth rates, rather than the growth rates adjusted for investments it likes to present to the market, although it is a high-quality business.
Other successful online classifieds businesses in Australia include property portal REA Group Limited (ASX: REA) and automobile trader Carsales.com Ltd (ASX: CAR). According to the News Corp media JPM has $70 and $12.50 share price targets on these two respective businesses.
