Ziprecruiter stock jumps on analyst upgrades, sees growth in strong jobs market

Ziprecruiter, the jobs marketplace which went public on May 26, was given several buy ratings yesterday — sending its stock up 10%

What’s the big deal? The job market is recovering after plummeting at the start of COVID. And now, companies can’t get positions filled fast enough.

In May, the US unemployment rate of 5.8% is an improvement from 3.5% in 2019. But the problem isn’t a lack of jobs — its a shortage of workers:

• According to a survey by the NFIB, 48% of small businesses struggled to fill job openings.
• More than half of workers want remote work but only 10% of employers want to offer that.

Investors: Job platforms like Ziprecruiter stand to benefit from a recovering jobs market and a declining trend in tenure.

• The US spends over $180b each year recruiting employees — with online resources making up 3% in 2016 and 6% in 2020, with 8% forecasted for 2025.
• In 2020, the median tenure of workers aged 25-34 was 2.8 years and 9.9 years for those between 55-64.

Zip’s sales are already above its pre-pandemic levels and expects 2nd quarter sales to increase to $157-163m, up 25% compared to the 1st quarter of 2021.

The Joe’s take: There’s a couple things that makes Zip worth a look:

• Despite reducing its marketing budget by 30% in 2020, sales only fell 2.5% — a sign of strength in Zip’s platform.
• Zip was profitable in 2020, unlike many other marketplaces and upstart tech companies.
• At a 5.4x price-to-sales multiple, its stock is also reasonably priced compared to other marketplaces.