Markets: Seek and sell

Citigroup analyst Justin Diddams says the deteriorating employment market is bad news for jobs website Seek.

Shares in Seek, the internet job website, have been downgraded to sell by Citigroup analyst Justin Diddams who says its shares are too expensive amid a weak job advertising market that will depress the company’s earnings in 2014.

Seek shares trade at 21 times Diddams’ forecast 2014 earnings. The employment advertising market is still under pressure, says the Citigroup analyst, who has cut his 2014 earnings per share forecast for the company by 16 per cent.

Economic activity, says Diddams, is approaching the lows of 2009. Citigroup says its analysis of three decades of job advertisements shows that the nadir for employment advertisements is 90,000 a week, 35 per cent below current volumes. Employment rates may not improve until 2015, says Diddams.

Citigroup forecasts Australia’s unemployment rate to peak at 5.9 per cent next year.

Diddams expects Seek shares to fall to $8.75 in the next 12 months, a 4.7 per cent drop in the stock price from current levels. At 1221 AEST the stock was down 13 cents, or 1.4 per cent, to $9.18, bringing its two-day drop to 3.9 per cent. Seek shares have gained 45 per cent in the last 12 months, according to Bloomberg data.