The team at Goldman Sachs has taken its sell rating off one leading ASX 100 stock today.
It made the move on valuation grounds, stating its belief that "positive recent updates not reflected in share price."
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Which ASX 100 stock?
The stock in question is Seek Ltd (ASX: SEK).
It is a market leader in online employment marketplaces and has been helping people find jobs for over 25 years.
The company started in Melbourne and now has a presence in New Zealand, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Additionally, it has minority investments in employment marketplaces in China, South Korea, and Bangladesh.
This means that across the Asia Pacific region, Seek has approximately 40 million candidate relationships and 400,000 hirer relationships.
What is the broker saying?
According to the note, the broker believes that a combination of a number of recent positive updates and share price weakness means there is a more balanced risk-reward for investors.
As a result, Goldman has upgraded the ASX 100 stock to a neutral rating with a $25.00 price target.
Based on the latest Seek share price of $22.84, this implies potential upside of 9.5% for investors over the next 12 months.
In addition, the broker is forecasting a modest 1.9% dividend yield in FY 2025 (growing to 2.5% in FY 2026). This brings the total potential return to approximately 11.5%.
Commenting on recent updates, the broker said:
SEEK's 1H25 result was a constructive update, partly addressing a number of our key concerns, including: (1) A 3rd consecutive half of double digit yield growth in the key ANZ market; (2) An earlier than expected partial monetization of the Seek Growth Fund (SGF), at a premium to Jun-24 valuations; and (3) Some evidence of cost discipline, with a A$15mn (-2%) reduction in FY25 total expenditure guidance, despite no change in revenue mid-point.
The January SEI was stronger than expected, with job ads rising +5.1% sequentially in Jan-25, its biggest sequential increase since Oct-21. Although incorporated within FY25 guidance, it results in a stronger volume trajectory for FY26 than we had expected – now forecasting +3.5% growth in FY26 (from +1%) driving group EBITDA +3% and our TP to A$25.0 (from A$24.0).
Things to watch
Goldman warned that it isn't quite ready to put a buy rating on the ASX 100 stock due to some risks. It said:
However, risks remain, underpinning our Neutral view. These include: (1) Potential for greater than expected opex investments into FY26E; (2) Global growth expectations remain uncertain – impacting ANZ & Asia volumes; (3) We expect SEK will need to revise its FY28, A$2.0bn revenue target (GSe/VAe A$1.5bn).
