Recruit Holdings (6098) plunges due to AI-based “offer withdrawal rate” assessment. When will the buying opportunity come?
Recruit Holdings (6098) stock price is plummeting.
One of the factors is,“scandals in Rikunavi”. It was problematic that they calculated the “offer acceptance rate” using AI and provided it to client companies. If clients used that to decide whether to hire, it would be a serious issue for job-seekers.
Another factor is,stock sales. Recruit went public in 2014, but even five years later, many large corporate clients held substantial shares. This time, 13 companies including Toppan Printing, Mitsui & Co., and Dai Nippon Printing are selling shares.
Stock sales do not directly affect the value of the company, butthey temporarily impact the stock price through worsened supply-demand for shares. It was also after the scandal that the stock price dropped further.
The “offer acceptance rate” issue could not be avoided when using AI
AI-based determination of the offer acceptance rate seems like a clash that happened in the flow of the times.Personal information and AI are intimately connected. Facebook and Google analyze collected personal data with AI to display optimized advertisements.Your data is already in the hands of AI.
AI-based “predictions” become more accurate as more data is gathered. In other words,in an AI-driven society, companies that hold more data are more likely to become the winners.
Recruit is one of the companies in Japan that holds the most consumer data. It surely contains massive, high-quality information not only related to employment but also through services like “Hot Pepper” and “SUUMO.”
Therefore, using AI was an inevitable trend. Not pursuing it as a business strategy would be unthinkable. Going forward, they are expected to organize their system and explore effective business models.The impact is not small, but I do not believe it will affect long-term strategy.
Domestic businesses that are a “cash cow,” the star “indeed”
The company is currently aggressively expanding investments in the “global” and “talent” areas. However,the part that generates the most profit is the domestic media & solutions sector, including Rikunavi and SUUMO.
For Recruit, the domestic sector is a “cash cow”. There are few other companies that can rival it, so by leveraging AI, it is expected to continue generating cash steadily.
Furthermore, a large growth potential lies in thejob-search-specific search site “indeed”.
It is the job-search version of Google, a business they are betting heavily on. You’ve probably seen their commercials on TV as well.
If this can dominate globally,it could become a media in the job-search field that even Google would struggle to compete with. Investors have high expectations for this.
Concerns are in the “overseas staffing business” — Was the acquisition right?
What worries me is the overseas staffing segment. Around the time of the 2014 stock listing,the company acquired many overseas staffing firms (U.S., Europe, Australia).
As a result, the company’s share rose to the fourth largest in the world, butprofit levels lag behind other businesses. Competition is intense, and it may not have been a very lucrative business.
The staffing business has high demand when the economy is good, butwhen the economy worsens, demand collapses. Therefore, the recent few years’ performance should be viewed as a tailwind at best.
If global economic conditions were to deteriorate, not only would profits decline, butthe 400 billion yen goodwill amortization arising from acquisitions could be forced. If that happens, the company would face a temporarily harsh environment.
It isn’t still cheap. Can you wait patiently?
Despite uncertainties,the financial condition is solid. Temporary losses are not a major issue.
The stability of domestic businesses and the growth potential of Indeed are remarkable. In other words, if there is a downturn that records losses and causes stock prices to fall, it could become a buying opportunity.
Current stock price is still around a PER of 30, soit cannot be considered cheap yet.
Such quality stocks rarely present buying opportunities. However,by waiting patiently, you will eventually encounter that opportunity. There is no need to rush to buy.
If you can buy then, it could become a driving force that greatly increases your wealth.
