UBS downgrades Zoopla due to ongoing OnTheMarket threat

UBS has downgraded Zoopla to a 'neutral' recommendation from 'buy' due to continued competetive pressures from rival OnTheMarket, but left Rightmove at 'buy'.

UBS said its Evidence Lab research team had unearthed data on the UK property portal marketplace that indicated estate agency collective OnTheMarket had continued its momentum in 2016.

The research showed OnTheMarket grew 6.8%, ahead of Rightmove's 1.1% and Zoopla's 0.7%, as well as increasing its share of app downloads.

"We maintain our view that OTM is unlikely to be a major long-term player, but remain for the number two player Zoopla, which has been more impacted since OTM's launch."

Of the FTSE 250 pair, Rightmove's market leading position remains strong, UBS said, with year-on-year agent growth of 4.9% to March and leading app stats being supportive of this.

"Overall, we see the launch of OTM as having actually strengthened the position of Rightmove by making it a stronger number one in the segment, with Rightmove now having circa 65% more properties listed for resale than Zoopla."

But Zoopla is downgraded due to OTM's threat, having grown its share of agents in the first quarter, while Zoopla "continues to show no sign of a significant recovery in agents".

The quarter saw agent growth of 3.3% compared to OTM's growth rate of 18.5%.

Zoopla's target price is nevertheless slightly increased to 260p from 250p.