Morgan Stanley downgrades Rightmove to 'equalweight'
Morgan Stanley has downgraded Rightmove to 'equalweight' from 'overweight' and kept the price target at 4,400p.
FTSE 250
20,870.89
14:15 07/10/24
FTSE 350
4,585.51
14:15 07/10/24
FTSE All-Share
4,542.19
14:15 07/10/24
Media
12,357.36
14:14 07/10/24
Rightmove
624.60p
14:14 07/10/24
The bank said Rightmove has secular growth, high margins and an attractive capital allocation strategy, while structural drivers mean the company's revenue could still double from here.
It pointed out that Rightmove has a 70% share of time spent on classified sites, with 90% of agents on subscription and 34% more listings than Zoopla, so it benefits from a strong network effect.
However, weakness in the UK property market could continue to weigh on the shares, it said.
"We still view them as a solid hold for shareholders, but near term, we see more headwinds than catalysts; move to equalweight ."
MS noted the shares are within 10% of its target price and said uncertainty around Brexit is unlikely to trigger positive news flow around the property market. As a result, the shares could still de-rate from the current 23x2018e price-to-earnings.
The bank said a price-to-earnings close to 20x would be a better entry point.
In online classifieds, it highlighted a preference for overweight-rated Auto Trader, which is trading on 21x, with upside risk to forecasts.
At 0944 GMT, the shares were down 0.2% to 3,991p.