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ZipRecruiter IPO: A Reopening Play?

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·3 min read
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ZipRecruiter (ZIP), which operates an online marketplace to help businesses locate potential employees, made its debut on the NYSE last week, with shares jumping 17% to $21.10 on its first day of trading.

The company went public via a direct listing, meaning it did not raise any capital in the offering. Advisors on the deal included Goldman Sachs (GS), J.P. Morgan (JPM), Barclays (BCS), Evercore ISI, William Blair, and Raymond James. (See IPO calendar on TipRanks)

Streamlining Job Searches

Ian Siegel, along with several other business partners, founded ZipRecruiter in 2010. The team had strong experience in the online world, with involvement in companies including CitySearch, Stamps.com (STMP) and Rent.com.

Even though online job search sites have been around since the early days of the internet, they have often been cumbersome. Additionally, they frequently provide poor matches between candidates and job positions.

The founders of ZipRecruiter thought there was an opportunity to make the process much easier. One of the keys was to focus on sophisticated technologies like ML (Machine Learning) and AI (Artificial Intelligence).

According to the company's S-1filing, “Through our deep learning-based natural language processing, we understand job seekers’ and employers’ nuanced needs. We model and analyze clicks, applications, hiring signals, and numerous other interactions to improve outcomes for all participants in our marketplace. Our advanced technology stack processes the data generated by our highly engaged user base to continuously improve our matchmaking.”

This strategy has certainly been spot on. Since the launch of the site, the company has served more than 2.8 million business and assisted 110 million job seekers. ZipRecruiter also has the No. 1 rated job-seeker app on iOS and Android, a position it has held for the past four years straight.

The Growth Story

As should be no surprise, the Covid-19 pandemic had a major impact on ZipRecruiter’s top line. From 2019 to 2020, the company's revenues dropped from $429.6 million to $417.1 million.

However, the company was swift in cutting costs and finding ways to automate operations. The result is that ZipRecruiter was actually able to post a profit of $63 million in 2020. Moreover, this number was based on GAAP (Generally Accepted Accounting Principles), which is impressive and quite rare for tech IPOs.

Fortunately, as the Covid-19 pandemic has started to fade, growth has gotten back on track for ZipRecruiter. In the first quarter, revenues were up by 11% to $125.4 million and the current quarter is on track for growth of 25% to 30%.

For full-year 2021, the company projects that revenues will increase at 39% to 44% year-over-year.

This prediction could actually prove to be an underestimate. As companies need to ramp up for the reopening of the U.S. economy, there will likely be strong demand for services like ZipRecruiter.

Bottom Line On ZipRecruiter

ZipRecruiter is in an intensely competitive industry. After all, the company has to fight tough rivals like Indeed.com and Microsoft’s (MSFT) LinkedIn.

Then again, with the reopening of the economy, there should be opportunities for all the major platforms. The fact is that millions of people have been out of work for a considerable amount of time. What’s more, ZipRecruiter should stand out from its competition, as its AI systems help to scale the business and provide more optimal matches.

For investors looking for a trade to play the economy's reopening, this stock looks like a good choice.

Disclosure: Tom Taulli does not have a position in ZipRecruiter stock.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.