$ZIP: set up for a massive run in 2022

Zip Recruiter ($ZIP) is a mispriced stock. I'm not a professional stock analyst and not giving investment advice, but the data below has me wondering why ZIP is currently trading for $25. Look at these charts and make your own conclusion. The stock is fundamentally underpriced, and it's going to moon after the next earnings call. ZIP is an extremely high growth company, but the stock is getting no love The reason zip recruiter is growing so much is driven by the “great resignation”, and employees leaving their jobs to go find better jobs. This is a trend that isn’t going to go away in 2022 If ZIP hits their Q4 guidance, their YOY growth rate will be 75%. I think Q4 guidance is way too low (see point #2), and my guess is that the company will be over 80% growth for 2021 In the world of software, there are only a few publicly traded companies growing revenues faster than 70% year over year… in my analysis, I only found 3 comparable companies (SNOW, BILL, S) The three companies below having insane growth are all much bigger, and have significantly higher valuations. Enterprise value multiples are all at least 10-30x greater than ZIP The average software company under $10B market cap is growing at 18%, but has a 10x enterprise value/revenue multiple If ZIP had the same EV/Rev multiple of it’s slower growing peers, it would be a $70-$100 stock Why does ZIP get no love? Tough to say. They just went public this year via direct listing, their market cap is a rounding error compared to other software companies, not many analysts follow them… regardless, they won’t stay under the radar for too much longer https://preview.redd.it/5ilohiss5m981.png?width=867&format=png&auto=webp&s=91bd47b3b122cb21ba2bab37590dd964622f34e3 2. ZIP is always cautious on revenue guidance, but then they deliver huge beats. Q4 will be no different (earnings release will be early Feb) The chart below shows quarterly revenue by quarter… Q2 2020 was the bottom of the pandemic, but you can see that revenues have steadily grown each quarter The orange bars are the company’s guidance… ZIP always set the bar extremely low, and then crushes with actual results The company guided Q4 revenue for $209M, which is actually less than Q3 revenues of $213M… a simple trend line would estimate Q4 revenues between $230-$240M When ZIP beat posted revenue of $213M in Q3 against guidance of $188M, the stock jumped 13% that trading day ZIP will report early February, and with their current price around $25, the stock will blow up (assuming that it stays steady in January) https://preview.redd.it/sap6h3na6m981.png?width=801&format=png&auto=webp&s=84277936e0a34beba9b6b0c64c5b05bbfa48a592 3. But what about profitability? In this time period of rising inflation, don’t investors want to see positive margins? ZIP is profitable on a GAAP basis... In Q3 ZIP posted net income of $22M on revenues of $213M, for healthy margins of 10.3% Snowflake, bill.com and SentinelOne are all nowhere near profitability ZIP is a rare company delivering growth >70% AND profitability 4. The macro economic environment is setting ZIP up to do very well in 2022… people are leaving their jobs at a record number, and companies are struggling to hire. High inflation times will force companies to pay more for good talent... thus, ZIP can actually pass the inflation on to their customers (companies looking to hire) and they could be relatively unaffected by inflation 5. TL/DR… buying ZIP for $25 a share is a steal; after next earnings call and once the company gets more attention, the stock could easily double or triple in 2022 6. Positions or ban: Yes... I heavily believe this thesis and have been buying shares all of 2021. I’m long 2500 shares and also long call options at $25 expiring in Jan https://preview.redd.it/y2g65wuz6m981.png?width=669&format=png&auto=webp&s=a8c66668d869e5d28dce9a92ba1ac2da8ce6b0e9

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$ZIP: set up for a massive run in 2022

bullish

Zip Recruiter ($ZIP) is a mispriced stock. I'm not a professional stock analyst and not giving investment advice, but the data below has me wondering why ZIP is currently trading for $25. Look at these charts and make your own conclusion. The stock is fundamentally underpriced, and it's going to moon after the next earnings call.

  1. ZIP is an extremely high growth company, but the stock is getting no love
  • The reason zip recruiter is growing so much is driven by the “great resignation”, and employees leaving their jobs to go find better jobs. This is a trend that isn't going to go away in 2022
  • If ZIP hits their Q4 guidance, their YOY growth rate will be 75%. I think Q4 guidance is way too low (see point #2), and my guess is that the company will be over 80% growth for 2021
  • In the world of software, there are only a few publicly traded companies growing revenues faster than 70% year over year… in my analysis, I only found 3 comparable companies (SNOW, BILL, S)
  • The three companies below having insane growth are all much bigger, and have significantly higher valuations. Enterprise value multiples are all at least 10-30x greater than ZIP
  • The average software company under $10B market cap is growing at 18%, but has a 10x enterprise value/revenue multiple
  • If ZIP had the same EV/Rev multiple of it's slower growing peers, it would be a $70-$100 stock
  • Why does ZIP get no love? Tough to say. They just went public this year via direct listing, their market cap is a rounding error compared to other software companies, not many analysts follow them… regardless, they won't stay under the radar for too much longer



2. ZIP is always cautious on revenue guidance, but then they deliver huge beats. Q4 will be no different (earnings release will be early Feb)

  • The chart below shows quarterly revenue by quarter… Q2 2020 was the bottom of the pandemic, but you can see that revenues have steadily grown each quarter
  • The orange bars are the company's guidance… ZIP always set the bar extremely low, and then crushes with actual results
  • The company guided Q4 revenue for $209M, which is actually less than Q3 revenues of $213M… a simple trend line would estimate Q4 revenues between $230-$240M
  • When ZIP beat posted revenue of $213M in Q3 against guidance of $188M, the stock jumped 13% that trading day
  • ZIP will report early February, and with their current price around $25, the stock will blow up (assuming that it stays steady in January)



3. But what about profitability? In this time period of rising inflation, don't investors want to see positive margins?

  • ZIP is profitable on a GAAP basis... In Q3 ZIP posted net income of $22M on revenues of $213M, for healthy margins of 10.3%
  • Snowflake, bill.com and SentinelOne are all nowhere near profitability
  • ZIP is a rare company delivering growth >70% AND profitability

4. The macro economic environment is setting ZIP up to do very well in 2022… people are leaving their jobs at a record number, and companies are struggling to hire. High inflation times will force companies to pay more for good talent... thus, ZIP can actually pass the inflation on to their customers (companies looking to hire) and they could be relatively unaffected by inflation

5. TL/DR… buying ZIP for $25 a share is a steal; after next earnings call and once the company gets more attention, the stock could easily double or triple in 2022

6. Positions or ban: Yes... I heavily believe this thesis and have been buying shares all of 2021. I'm long 2500 shares and also long call options at $25 expiring in Jan



read-time
3 min
28.50
Target Price
6/ 10
Confidence
6-12 Months
Timeframe
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Earnings Release
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News
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SEC
Filing
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