The Tempus column in The Times has issued ‘Sell’ advice to investors over Rightmove shares.
Friday’s column, by Miles Costello, said Rightmove’s “growth options look limited in a market that is already wildly competitive and set to become more so”.
The column does, however, base at least some of its arguments on a big misconception, confusing online agents with portals.
It starts by saying that Rightmove’s “upstart rivals” include ZPG, Purplebricks, OnTheMarket and Emoov.
Given that ZPG is hardly an upstart, and that Purplebricks and Emoov were agents and not portals when we last looked, that’s a very large fly in the argument.
However, the column is interesting in analysing why Rightmove shares, which peaked in June at 535p, have since lost more than a fifth in value.
“Rightmove’s perceived reliance on fees paid by estate agents, and its ability to keep putting up its prices, has had analysts fretting.
“When Rightmove reported its half-year results in late July, the numbers were startlingly good bearing in mind the wider pressures: revenues up 10% to £131.1m, pre-tax profits 12% higher to £98.1m and the dividend up 14% to 25p a share.
“What analysts and investors saw, though, was Rightmove’s flat membership levels; just 23 agents and developers joined in the six months to [the] end of June and there were only 92 additions over the 12 months.
“Berenberg cut to sell from hold and Peel Hunt moved to reduce, both of them highlighting the cost and consolidation pressures on agents and the threat from rivals, not least OnTheMarket, which has been offering free listings.
“Rightmove’s subscription model shields it from price and supply problems, but not from cost-conscious agents transferring their allegiance to a free or cheaper rival.”
Rightmove shares start the new week priced at around 460p.