HSBC upgrades Rightmove to ‘buy’

HSBC upgraded Rightmove on Tuesday to ‘buy’ from ‘hold’ and lifted the price target to 645p from 530p as it said some of the early demand indicators show return of buyers’ interest and argued that positive sentiment from agents is not priced into current multiples for the stock.

The bank noted that data from the UK housing market is showing early signs that the demand underhang may be starting to close.

"Some of these early indicators of demand, including new buyer enquiries, new instructions and sales agreed, are edging towards more-normal 2019 levels," HSBC said.

"According to Zoopla, demand levels are 16% higher compared to 2019 and Rightmove data shows sales agreed in March were similar to 2019 levels. Although it’s too early to tell if the demand is sustainable and whether the demand from first time buyers will trigger a chain reaction, creating a ripple effect, the activity levels are in a better shape than at the end of 2022."

HSBC said it reckons 2023 "will test Rightmove’s moats" and its ability to balance wage inflation at a time when there is pressure on agents’ marketing budgets.

"Historically, Rightmove has shown a disciplined approach with a rejigging of the product structure every 18-24 months, with its last major update of Optimiser 20 (from Optimiser 15) in Q4 2019," it said. "Now that all of the estate agents have upgraded to Optimiser 20, we believe the potential for a new product in late 2023 or early 2024 is entirely plausible and could support ARPA growth next year.

"However, closure of low-stock agents will be a risk to watch out for as we progress though the year."

At 1440 BST, Rightmove shares were up 1.2% at 581p.