Rightmove's share price slides despite dividend bump

It was not a bad set of full-year results for Rightmove (RMV). But when you trade at 21 times the consensus forecast earnings for 2024, expectations run high.

As it was, shares fell 4 per cent in early trading, narrowing to a 1 per cent drop by the afternoon of results day. This came despite the housing market website's sales and dividend growing by a tenth. What's more, they were in line with analyst expectations. Rightmove managed this even though total memberships dropped 1 per cent and website traffic fell from 16.3bn minutes in 2022 to 15.4bn minutes as higher mortgage rates reduced buyer appetite. In other words, fewer agents spent more money to get their properties sold in a subdued market.

The share price reaction was likely to be the product of its flat trajectory predictions for agency numbers. Analysts' consensus forecasts for 2025 suggest this won't hurt earnings or dividends, with predictions of 29.1p and 10.6p per share, respectively.

Chief financial officer Alison Dolan told Investors' Chronicle she was "not at all" concerned by US property data giant CoStar's (US:GSGP) purchase of OnTheMarket last year in an audacious bid to erode Rightmove's market share. She said Rightmove has seen off competition before, most recently from the collapsed Boomin, and that it has network effects on its side, as agents advertise there because that's what the other agents do. 

However, CoStar is a bigger beast, has a better track record, owns stacks of high-quality data, and has a much lower operating margin (of around 10 per cent compared with Rightmove's 71 per cent) from cheaper agency fees. We remain bullish but are warier than Dolan of its rival's potential. Buy.

Las IC view: Buy, 540p, 28 Jul 2023