Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

Is the SEEK (ASX:SEK) share price a buy even at all-time highs?

The SEEK Limited (ASX:SEK) share price is hitting all-time highs despite the recent claims from US activist short-seller Blue Orca. Is SEEK a buy?

Shares in job search platform SEEK Limited (ASX: SEK) have made a strong recovery from the start of the month, following tension between US activist short-seller Blue Orca and SEEK’s business in China, Zhaopin.

The SEEK share price has been a great success story over the years, but I’m sure many investors have been left wondering if the current share price is justified given the associated risks and the exposure to economic cycles.

SEEK share price chart

Source: Rask Media 2-year SEK share price chart

What does SEEK do?

SEEK is a global leader in employment and education-related services, with operations in over 18 countries. Its business is broadly split between providing a platform for employment advertisements, and a learning platform for vocational and educational courses.

SEEK generates revenue through multiple streams, however, much of it is through ad revenue. As such, SEEK is very much leveraged to the overall economic cycle, which will influence the number of jobs that are listed on the website.

What’s happened recently?

US activist short-seller Blue Orca has been trying to draw public attention to SEEK’s Chinese business Zhaopin. The accusation from Blue Orca is that Zhaopin has listed fake job listings and has also been provided “zombie resumes” from users.

Blue Orca CEO Soren Aandahl claims that SEEK carries the valuation of a growth stock, without the underlying growth to justify it. Blue Orca estimates a much lower valuation for the company, which is the result of Zhaopin capitalising research and development costs over time, rather than expensing these costs as they’re incurred on the income statement.

Instead of recognising costs upfront, R&D costs can be amortised over 3-5 years, resulting in a much higher EBITDA and net income figure in the earlier years.

The growth of the global SEEK business has mainly been driven by Zhaopin, so any disruption in this segment will have large underlying effects on the valuation of the shares on the ASX.

When Soren Aandahl previously worked at Glaucus, successful activist shorts were executed on sandalwood grower Quintis as well as Blue Sky Alternative Investments.

Are SEEK shares a buy?

In SEEK’s announcement at the beginning of the month, it claimed that many of Blue Orca’s claims were inaccurate and substantiated.

SEEK’s management has indicated its accounting practices have also been consistent and compliant with International Financial Reporting Standards (IFRS).

I would be willing to back SEEK’s management here, although I still think I’d rather sit out on this one for the moment given the uncertainty. I’d rather invest in these 3 ASX growth shares today.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
Skip to content