Today we have a very speculative idea: take shares of the HR platform ZipRecruiter (NYSE: ZIP) hoping for a rebound of these stocks, and the growth of the company's business.
Growth potential and validity: 20,5% behind 15 Months; 11% per year for 10 years.
Why stocks can go up: there is a demand for the company's software and shares.
How do we act: we take shares now by 25,00 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
The company has been listed on the stock exchange since May 2021. ZIP is an HR platform, through which employers post information about their vacancies on various classifieds sites, including on the site of the ZIP itself. How the ZIP Platform Works, can be viewed on the YouTube channel.
Functions ZIP based on artificial intelligence and machine learning. For an employer, it looks like this:
- After posting a job, AI sends information about it to suitable candidates.
- After receiving applications from applicants, the employer ranks applicants according to the level of their compliance with the vacancy.
- AI remembers employer choice and invites eligible applicants to apply.
ZIP makes money, receiving payment from employers for the opportunity to advertise vacancies, as well as for using various features of the site such as advanced AI job search.
According to the company registration prospectus, its revenue is divided into two segments:
- Subscription - 82,93%. Employers pay a company to access its software, regardless of whether, how often they use it.
- Execution fee - 17,07%. Revenue, which zip receives, when employers, instead of subscribing, choose to place an ad on the sites of ZIP and its partners and pay for the number of clicks or clicks on the ad.
The company makes almost all of its money in the US., non-U.S. revenue is negligible, and its size is unknown.
The company as a whole is profitable. But the huge costs of promotion and marketing periodically interfere with this., leading ZIP to losses.
Arguments in favor of the company
Fell down. From the historical maximum of November 2021 in 32,15 $ stocks under the weight of their high cost fell to 24,86 $, which gives us the opportunity to pick them up in anticipation of a rebound.
small size. The company has a capitalization of only 2.9 billion dollars, which will facilitate its speculative pumping.
Hysteria. Big words about AI and machinery education, as well as the hysteria around this, skillfully inflated by technology consultants, will attract a mass investor to the shares of the company, which will allow to pump up quotes.
There is a demand. Now in the USA there is a great personnel shortage, and the use of ZIP software for employers is nowhere more relevant - after all, on the ZIP platform, the average time, which vacancy remains open, is only 16 days. Yes, and the gradual transition to remote work will contribute to the growth of the company's financial performance: it's clear, that it is precisely those employers who work most actively on the ZIP platform, who have great opportunities to introduce remote work. So while I see great prospects for the ZIP business, both in short, and long distances.
Can buy. P / S company about 4,5 — it's quite a bit by IT standards. And then, that the company is profitable, allows you to hope, that ZIP will be bought by some major technology company.
What can get in the way
"There are two classes..." The company has 2 class of shares: A, traded on the stock exchange, and B - from the founders of the company. Class B gives more votes - and the founders of the company in total have a majority in voting. This could pose problems for minority shareholders like you and me.: for example, management may refuse to sell the company in the hope of "building an empire and changing the world".
Suddenly, war, and i'm tired. A repeat of a hard quarantine with a drop in business activity will not bury the ZIP business, but will slow it down significantly..
That's all, guys! There are reasons to believe, that the company's business will soon begin to stall. If in March 2021, the revenue from one paying employer was about 1093 $, then as of September 2021 it is 1254 $. There is progress, but not so strong, as we would like. If the company's revenue and profit growth slows down, then investors will react to this with their usual temper and drop quotes.
LinkedIn. The company has many competitors like Indeed and Glassdoor. But I see LinkedIn as the most formidable of them., owned by Microsoft. LinkedIn still hasn't paid for itself, and Microsoft's pockets are just bottomless - so the company can afford to spend money on promoting and transforming LinkedIn, which will be bad for the ZIP business, which already has to spend heavily on marketing.
High cost. P / The company's E is now approximately 182, which is quite expensive. So stocks can shake things up, especially if the company's operating metrics - like the revenue generated from the average employer - will seriously slip.
What's the bottom line?
We take shares now by 25,00 $. And then there are two options.:
- wait, when will the shares be worth 30 $. Think, we will reach this level in the next 15 Months;
- keep shares next 10 years in sorrow and joy, to see, how the company's business will flourish.
But still keep in mind: due to high P / E these stocks can be very volatile..
