Rightmove valuation does not reflect risks, says Berenberg

The bank noted that Rightmove shares have recovered 35% since its March upgrade, outperforming the FTSE 250 by about 5%. At the same time, agent backlash against Rightmove has increased "markedly", it said, with the "Say No To Rightmove" campaign gaining traction.

Berenberg said many agents are angered by Rightmove’s initial response to Covid-19 and are reluctant to pay the full price ever again.

"We believe Rightmove’s substantial discounts (a likely response to this initial backlash) - recently extended until the end of September - are now exactly the right solution and admire the company’s management team for thinking about medium-term value preservation.

"However, we believe not only that there is a high chance that some level of discounting will continue until the end of this year, but that it will be near-impossible for Rightmove to return to the same level of price increases achieved in the past without an agent rebellion."

Rightmove said earlier this week that revenues will be hit further as it continues to support its agents with discounts following disruption from the Covid-19 outbreak

Berenberg pointed out that agents have long protested against Rightmove’s pricing and said this is "their carpe diem moment".

"We expect significant pressure on future revenues and margins," it added.

A key risk to its ‘sell’ rating would be if government stimulus such as a stamp duty holiday were to be announced in the Chancellor’s summer statement.

"Our view is that Rightmove’s model of raising prices would remain under threat, but a large boost to the property market would definitely raise agent morale and help to paper over the cracks for now," it said.

At 0925 BST, the shares were down 2.9% at 537p.