We came across a bullish thesis on ZipRecruiter, Inc. (ZIP) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on ZIP. ZipRecruiter, Inc. (ZIP)’s share was trading at $6.76 as of Jan 10th. ZIP’s trailing and forward P/E were 225.33 and 17.30 respectively according to Yahoo Finance.
A project manager and their team discussing a timeline for a large employment program.
Small business optimism has surged following the 2024 election, with small businesses driving the majority of new job creation in the U.S. Despite weaker earnings trends compared to 2023, many small business owners are planning expansions, capital outlays, and hiring. This sentiment aligns with a broader narrative of small businesses viewing themselves as “temporarily disgraced millionaires,” reinvigorated by policies and rhetoric favoring entrepreneurial growth. This optimism is likely to boost staffing companies’ volumes, particularly after the holiday season, when small businesses typically ramp up hiring. A thawing labor market, signaled by a December survey from ZipRecruiter (ZIP), reveals that over 80% of tech and finance employers plan to increase hiring in 2025. This shift could bring a rebound in the labor market and drive growth for staffing companies.
Among staffing firms, ZipRecruiter stands out as the most compelling investment. While its quarterly revenue has declined from a peak of $240 million in 2022 to $114 million, ZIP has achieved significant operational efficiencies. EBITDA margins are improving, market share is growing, and revenue per employer has increased by 14% annually since 2021. ZipRecruiter has leveraged proprietary data and artificial intelligence, embodied by its AI agent “Phil,” to enhance matching success rates. The “Invite to Apply” program has further bolstered its competitive edge over larger rivals such as Indeed and LinkedIn. Management has executed a credible turnaround, with plans to reduce general marketing expenses as a percentage of revenue, potentially expanding margins from the current 20% to a long-term target of 30%.
ZIP’s focus on technology and consistent market share gains position it to capitalize on a labor market recovery. A return to its 2022 peak sales of approximately $1 billion and a conservative valuation of 4.0x price-to-sales could support a stock price target of $47, offering significant upside from current levels. Insiders have not been buying, but ongoing share repurchases and the CEO’s founding stake underscore management’s alignment with shareholder interests.
ZipRecruiter, Inc. (ZIP) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held ZIP at the end of the third quarter which was 19 in the previous quarter. While we acknowledge the risk and potential of ZIP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ZIP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.