Views on SEEK Ltd (SEK)
Hi Guys, Seek is trading around 10 year lows now. Do you think it's worth considering at these levels as a medium term investment ? Simon
The Latest Q&A
Answer
Hi Simon,
SEEK is enduring a really tough 2026, trading down ~36% year-to-date on Wednesday, posting fresh 6-year lows as you alluded to. As we’ve discussed a few times in recent weeks, MM believes the software sector is “looking for a low” as the “AI Disruption Trade” drags the sector down as one.
However, we believe SEK and other classified type business are more susceptible to disruption. Further, we can only see employment conditions deteriorating as AI reduces headcount. We have read plenty of research around productivity benefits of AI, and indeed, we’re seeing it in our own business.
Businesses will be able to operate with fewer employees in the future than we do today. When unemployment rises, it usually means businesses are cutting hiring and job vacancies decline. SEK makes money primarily from employers paying to list job ads. If job ads fall, this directly hits revenue and earnings. They have a relatively fixed cost base (tech, platform, staff), so when revenue slows margins compress and earnings fall faster than revenue, which is why historically, SEK often underperforms early in downturns, but generally does okay because they have pricing power (being the dominant platform). In an AI world that could become more competitive, we question whether or not this historical pricing power will be as evident in the future.
They will benefit from efficiencies themselves, and it’s hard to know how this will play out, however, in simple terms, weakening employment conditions which we certainly see evolveing over time, is a negative for SEK.
- Hence, while we can see SEK bouncing if/when the sector does enjoy a meaningful recovery, we prefer others in the space.
