SEEK share price tumbles following broker downgrade

The SEEK Limited (ASX:SEK) share price is tumbling lower on Thursday after analysts at Morgans downgraded it to a hold rating…

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The SEEK Limited (ASX: SEK) share price is one of the worst performers on the ASX 200 on Thursday.

The job listings giant's shares are down 4% to $21.80 at the time of writing.

Why is the SEEK share price tumbling lower today?

Investors have been selling SEEK's shares after it was the subject of a broker note out of Morgans.

As you might have guessed from the share price weakness, it wasn't an overly positive one.

According to the note, Morgans has downgraded SEEK's shares to a hold rating from add. Its analysts have also cut the price target on them slightly to $21.82.

Why has Morgans downgraded SEEK's shares?

There are two main catalysts for Morgans' downgrade to a hold rating.

The first is its valuation. Prior to today, SEEK's shares were up were up a massive 38% since the start of the year. This left them trading at a level beyond the broker's price target.

The second catalyst is its Zhaopin business. Morgans appears concerned that the China-based business is being negatively impacted by the US-China trade war.

It notes that momentum in the online job listings business is softening after the Chinese SME sector started to feel the effects of the trade war.

And while Morgans acknowledges that its short-term labour hire division continues to grow strongly, it doesn't believe this will be enough to offset a decline in job advertisements. As a result, the broker has downgraded its forecasts for the China business.

Other downgrades.

SEEK isn't the only share that has been downgraded on Thursday.

A note out of Citi reveals that its analysts have downgraded ALS Ltd (ASX: ALQ) shares to a neutral rating from buy. This was made on valuation grounds after a strong post-result gain on Wednesday.

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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