Berenberg upgrades Rightmove, hikes price target

Berenberg upgraded Rightmove to ‘hold’ from ‘sell’ on Tuesday and hiked the price target to 710p from 455p as it said the stock’s valuation was full but “not extreme”.
“We conclude that our previous thesis – that Rightmove would experience slowing top-line growth and margin pressure as it struggled to extract higher average revenue per advertiser from its estate agency customers – is unlikely to play out in the medium term,” the bank said.

Berenberg said that with the UK real estate market in rude health, and likely to remain robust even once the reduced stamp duty incentive comes to an end in September, it is hard to see what could really hinder Rightmove.

“The company has survived multiple challenges from start-up competitors, and undoubtedly agents would rather they were less dependent on the portal; however, that dependency remains high, and stiff competition between agents in a tight market means that they a) need to maintain their portal listings, and b) need Rightmove’s new products,” it said.

Berenberg said that with an unlevered free cash flow yield of 3.4% for 2021, Rightmove’s valuation does not look unreasonable given its premium market positioning and potential for further growth, particularly in rental (near term) and consumer services (longer term).

At 1110 BST, the shares were up 1.4% at 729.20p.

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