Citigroup downgrades Rightmove to 'sell'
Citigroup downgraded Rightmove to ‘sell’ from ‘neutral’ but lifted the price target to 3,770p from 3,650p.
FTSE 250
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Rightmove
537.00p
16:34 28/06/24
The bank pointed to a muted growth outlook on 12-24 month basis and a rich valuation as the reasons behind the downgrade.
Citi said it was recapping its post-Brexit assumptions. It estimates a 2% increase in agent members for full-year 2016, but a 5% drop in 2017 and 2018, as well as a 2.5% decline in new home developments in both years.
While it expects robust average revenue per advertiser for FY16 at £85 per office per month, in line with the first half development, it expects the uplift in the future years to be around £75. As a result, Citi expects both reported revenue and EPS growth to slow to low single digits.
Citi said the kind of slowdown it outlines would not be a massive concern if Rightmove had another source of growth. However, unlike Zoopla, which has cut its net exposure to property classifieds to less than 50% of revenues, Rightmove is more reliant on driving agency volume growth and pricing/yield to secure overall revenue growth.
At 1550 GMT, Rightmove shares were down 2.7% to 4,008p.