Zoopla zooms back on Exane and Investec upgrades

Exane moved to a 'neutral' rating from 'underperform', with a target price of 220p, while Investec raised its recommendation to 'hold' from the previous 'sell' and set a 231p price target.

Exane admitted its consistently cautious position on Zoopla had reflected a view that its operations and pricing would suffer a "significant, lasting" effect from the launch of the new rival OnTheMarket website from estate agency collective Agents Mutual, together with the "must have" status of Rightmove.

But following around 30% cuts to 2016 profit forecasts since its IPO, Exane analyst William Packer now sees the consensus estimate for core portal earnings before interest, tax, depreciation and amortisation (EBITDA) as achievable.

"Based on conversations with our network of estate agent contacts, and with Agents Mutual at under 1k of intent after seven months of recruitment we remain cautious on its prospects for success and expect the challenger to be unsuccessful in reaching its 7.5k letters of intent target. We expect the status quo to hold, with Agents Mutual remaining a significant #3," Packer wrote.

Stats from online traffic analysts Alexa showed the relative gap between Zoopla and Rightmove in website visit ranking had widened since summer data showed Zoopla had around 46m visits per month in July compared to its rival's 110m in June.

So, Investec's Steve Liechti likewise said that while he remained concerned on the widening gap in Zoopla’s portal proposition strength versus Rightmove, as well as the persistent drag from OnTheMarket and reliance on uSwitch's ‘mono vertical’, he believes these are "now more factored into the share price" since the shares fell around 10% in the last month.

While the knock-on impact of OnTheMarket (OTM) is weakening Zoopla’s market position against Rightmove, with lower inventory, member stickiness, traffic and questions on lead quality, Liechti said he still believes Zoopla offers return on investment to its members and that its model and economics remain strong.

"Net churn to OTM stabilised in Aug/Sep and we do not expect significant further loss with limited OTM traction in terms of membership growth and visitors. Although OTM looks likely to stay, we believe our forecasts already account for this."

Shares in Zoopla were 2.1% higher to 224.37p by mid-morning on Friday.