While it may be enjoying the increase in listings and traffic since the end of lockdown, not everyone is convinced that Rightmove’s prospects are entirely rosy.
Berenberg has reiterated its ‘sell’ rating on the shares, arguing that the risk/reward is unattractive and that investors should “sell into strength”.
The bank, has lifted its price target to 400p from 385p, saying it would be: “very optimistic to assume everything will be fine from here”.
“We, however, believe there are material risks to the financial health of estate agents when: a) furlough schemes end, and b) the stamp duty holiday ends at the end of March 2021,” it said.
“These risks add to an industry already struggling pre-Covid-19 (with numerous branch closures), and will add further pressure on either Rightmove’s pricing potential and/or agency customer numbers.”
Berenberg said near-term discounts are papering over the cracks and that both cyclical and structural headwinds will resurface sooner rather than later.
“With substantial uncertainty ahead, and with now clear evidence of the cyclicality of Rightmove’s business, we believe a materially lower multiple is warranted,” it said.
Berenberg was sceptical about Rightmove this time last year when it said it was “not a crazy assumption” to make that the agents who stay on Rightmove will be less receptive than usual to price increases and that agents were suffering from “numerous” headwinds such as pressure on commission rates, over-supply of agents, and the lettings fee ban. That was long before Covid put in an appearance.
At that time Rightmove shares were trading at about 528p and Berenberg set a target price of 420p.
Yesterday the shares closed at 614.2p
City analysts warn investors of ‘signs of cracks’ at Rightmove
Comments (10)
and B R E X I T
We’ve had several cliff edges in the past and the market always recovers. It’s simply a question of how quickly or slowly this happens.
This recession is different. It’s engineered. We have chosen to lockdown, or been forced to lockdown by our elected Government, and it’s mostly the lockdown and restrictions that have caused the recession so far. Job losses will deepen the recession and that should be blindingly obvious to anyone.
U.K. has seen a long period of low unemployment pre-COVID and the economy will recover quite quickly compared to previous recessions.
“These risks add to an industry already struggling pre-Covid-19 (with numerous branch closures), and will add further pressure on either Rightmove’s pricing potential and/or agency customer numbers.”
Their share price shouldn’t be affected by branch closures or the number of agency customers, rather by the overall state of the market and the number of properties listed. It’s reasonable to assume that other agents will pick up whatever instructions are in the market that otherwise may have been given to those that have disappeared…..
I would have thought impending job losses will have had a bigger effect on the economy / housing market long before we get to the end of the stamp duty holiday. Makes whether the stamp duty holiday is cliff edge or staggered largely academic in my mind.
The world goes on after 31/3/2020…
I agree. Unfortunately the cliff drop end to the stamp duty holiday is likely to cause the biggest housing market crash since 1988 which will result in economic recession. Not the other way round. It’s just maths!!
Ever the optimist EAMD172 🙂
Again I find myself in the unusual position of glass half full rather than half empty, not my usual frame of mind at all.
It would be helpful if they phased it out rather than just pulling it altogether, a bit like they’re doing with furlough, where I am you can get 5-6% yields even now so any market crash will result in the ” haves ” buying to the detriment of the ” have nots ” and getting yields 6%+ its a no-brainer unless the government stick the boot in ( again ) to landlords.
Also, would you rather be at the mercy of a lender or a private landlord in a co-vid type scenario? Lender everytime.
Also, why would you want to rent when the rental ( around here at least ) is a few hundred quid more than a mortgage payment, which is itself not entirely dead money as a proportion of that mortgage payment is buying it outright a few bricks at a time on a monthly basis.
It is very simple maths.
Rent = £1,500 per month “wasted”
Value of house = £600,000. If falling at 10% p/a that equates to £5,000 loss in value per month.
I think 10% may be a conservative figure if EAMD172 is correct.
Only relevant if you’re selling up Newsboy, previous peak in 07 prices were off by 15% by Spring 09 because YOU COULDN’T GET A MORTGAGE through 08 unless you were squeakier than something very squeaky, what happens to any market when the main vehicle for purchase is removed?
Fast forward 11 years and pre co-vid prices were back at +10% to the 07 peak, everybody needs somewhere to live.
You forget 1965, 1973/4, 1988 and 2001 Prices took 7 years to reach the bottom in 1995 and many years to get back to where they were in 1988. Millions suffered and hundreds of thousands suffered with negative equity and repossessions.
I fully appreciate that inflation and the times are very different now. Do you seriously believe it is going to get easier to get a mortgage? No chance, not with the lenders and banks suffering very badly – as they will.
This is not a time to get your children to buy their first home.
Maybe we can continue this discussion in 9 months time when the market is on its knees!
happy to do so, I started in Jan 89 and remember it well, top neg for the company in 91 and recieved a £1000 holiday voucher with which me and my brother let rip in Ibiza, we opened our first office in 99 and from a cold start in May ( nothing to sell other than mock ups of my mums house in the window basically saying if we had anything this is how we’d do it ) we wrote a 20k month in the August.
To paraphrase, A bit like Naseem said of Chris Eubank junior after he was pulverized by George Groves ” You’re either good at agency, or you’re NOT! “