Evercore ISI Downgrades ZipRecruiter (ZIP) to In Line, 'Downgrading A Late Cycle Recovery Play'

Evercore ISI analyst Mark Mahaney downgraded ZipRecruiter (NYSE: ZIP) from Outperform to In Line with a price target of $18.00 (from $20.00).

The analyst comments "Downgrade to In Line: We are downgrading shares of ZIP from Outperform to In Line in the wake of In-Line & Lower Q2 EPS results. Fundamentals are weaker than we had anticipated, and trends are continuing to deteriorate faster than we had expected. We are lowering our ’23 Revenue by 15% and our ’23 EBITDA by 18%, and our PT slips from $20 to $18. With shares at 8X EV/EBITDA, we believe there is reasonable valuation support here. And the company is demonstrating an impressive ability to maintain robust (20%ish) EBITDA Margins in a materially declining revenue environment. But with Revenue declines likely to accelerate into H2 (down 29% Y/Y in Q2, down 34% in Q3 and down 39% in Q4), we don’t see a positive catalyst over the next 6+ months. Our high-level view is that hiring will be more delayed than normal this cycle – e.g. we expect Tech companies to recover revenue growth rates well before they begin hiring again – which means that the recovery in ZIP’s revenue trends will be a ’24 event (plausibly H2:24). We acknowledge that our Outperform rating on ZIP has been wrong. We step to the sidelines and will wait for a positive inflection in ZIP fundamentals before considering becoming constructive again."

For an analyst ratings summary and ratings history on ZipRecruiter click here. For more ratings news on ZipRecruiter click here.

Shares of ZipRecruiter closed at $17.39 yesterday.

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