Investidea: ZipRecruiter, because we will call you back

Инвестидея: ZipRecruiter, потому что мы вам перезвоним

Today we have a very speculative idea: take shares of the HR platform ZipRecruiter (NYSE: ZIP) in the hope of a rebound in these stocks, and on the growth of the company's business.

Growth potential and duration: 20,5% for 15 months; 11% per year for 10 years.

Why stocks can go up: there is a demand for company 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. Hopefully, 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 are we writing, Are forecasts and hypotheses, not a call to action. It is up to you to rely on our thoughts or not..

And what about the author's predictions

Research, for example 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 perform better than people, but alas, they work worse.

Therefore, we do not try to build complex models.. The profit forecast in the article is the author's expectations. We indicate this forecast as a guideline. As with the investment in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

We love, appreciate,
Investment editorial office

What the company makes money on

The company has been traded on the stock exchange since May 2021. ZIP is an HR platform, through which employers post information about their vacancies on different classifieds sites, including on the website of THE ZIP itself. How the ZIP Platform Works, can be viewed on the company's You You Web channel.

Operates ZIP based on artificial intelligence and machine learning. For an employer, it looks like this:

  1. After a vacancy is posted, AI sends information about it to suitable candidates..
  2. After receiving applicants' applications, the employer ranks applicants according to the level of their compliance with the vacancy.
  3. AI remembers the choice of the employer and invites applicants who meet its criteria to apply.

ZIP makes money, receiving a fee from employers for the opportunity to post vacancy announcements, as well as for the use of various functions of the site such as advanced search for applicants using AI.

  Well, how many times can you " past the checkout"?

According to the company registration prospectus, its revenue is divided into two segments:

  1. Subscription - 82,93%. Employers pay a company for access to its software, regardless of, how often they use it.
  2. 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 transitions on the ad.

The company makes almost all the money in the USA., revenue outside the U.S. is irrelevant, and its size is unknown.

The company as a whole is profitable. But the huge costs of promotion and marketing periodically interfere with this., causing ZIP losses.

Инвестидея: ZipRecruiter, потому что мы вам перезвоним

Инвестидея: ZipRecruiter, потому что мы вам перезвоним

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, which will facilitate its speculative pumping.

Hysteria. Big words about AI and machinery training, as well as the hysteria skillfully fanned by technology consultants around this will attract a mass investor to the company's shares., which will allow to pump up quotes.

There is a demand. Now in the United States there is a great staff shortage, and the use of ZIP software for employers is nowhere more relevant - after all, the average time on the ZIP platform, which vacancy remains open, is only 16 days. And the gradual transition to remote work will contribute to the growth of the company's financial performance.: understandably, that it is 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 zip business as short, and long distances.

Can buy. P / S company about 4,5 — it's quite a bit by IT standards. And that, that the company is profitable, allows you to hope so, 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 be a problem for minority shareholders like you and me.: eg, management may refuse to sell the company in the hope of "building an empire and changing the world".

  Cat's away mice play

Suddenly, war, and I'm tired. A repeat of the strict quarantine with a drop in business activity will not bury the business ZIP, but significantly slow it down.

That's all, guys! There is reason 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 growth of revenue and profits of the company will slow down, then investors will react to this with their characteristic irascibility and drop the quotes..

LinkedIn. The company has many competitors such as 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 simply bottomless — so the company can afford to spend money on promoting and transforming LinkedIn., what will be bad for the zip business, which already has to spend a lot 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 a company's operating metrics — such as revenue from the average employer — are seriously stalled..

What is the bottom line

We take shares now by 25,00 $. And then there are two options:

  1. wait, when will the shares be worth 30 $. I think, we will reach this level in the next 15 months;
  2. 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..

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