Shore Capital downgrades Auto Trader to 'sell'

Full-year results from the company on 30 May revealed a "good performance", according to Shore Capital analyst Roddy Davidson, with revenues, profits and KPIs for the 12 months to 31 March all showing a solid increase on the year before.

Davidson also highlighted Auto Trader's Deal Builder offering, which links up with car dealers with its digital platform, blending physical forecourt retailing with online channels to drive transactions.

"Although still nascent (1.1k retailers / 16k deals during the period), [Deal Builder] is a potentially promising product bringing together valuation, vehicle reservation, part exchange and finance functionality," he said.

Auto Trader also said that current trading was positive and that the new financial year had "started well" with the car market "relatively stable".

Davidson said the results "provided a reminder of the group’s underlying attractions" and has raised its headline estimates in response, though upgrades were "not hugely material".

After a "generous" share price reaction of more than 12%, Davidson said the stock's valuation has been pushed into 'sell' territory when compared with Shore Capital's fair-value estimate of 676p.

The stock was up a further 1.2% at 826p by 1521 BST on Monday, having now risen 18% since the start of 2024 and 35% over the past 12 months.