Rightmove needs to avoid getting cocky

To say that Rightmove (RMV) has not been impacted by the cost of living crisis, the looming threat of another recession and the current market downturn, would be a lie. Its share price is down over 20 per cent in the year to date and it is a similar story for the many other listed residential and commercial property companies.

Yet, the short-term outlook for Rightmove hides the fact that the underlying business case remains strong: it is a vital tool for estate agents looking to promote their properties online; revenues and profits are growing; and the business is cheap to run. While a housing market downturn could buffet earnings, it seems likely that people will continue to buy, rent and sell homes online whatever happens. Furthermore, average revenue per advertiser rose 11 per cent in these results, prompting the company to upgrade full-year guidance on this front.

As things stand, Rightmove is the biggest one-stop online aggregator of homes in the UK. However, with plenty of estate agencies creating their own online portal and Zoopla snapping at its heels, It cannot afford to be complacent. The company is currently sitting on £33mn in net cash. Considering its enviable market position, it would arguably be wise to invest that money back into its tech – making certain that its website and app are more user-friendly than any of its rivals. Indeed, given how consistently strong Rightmove’s finances have been, it could even take on debt to make these investments in order to maintain its market dominance. Still, these are small complaints about a company which clearly knows what it is doing. Buy.

Last IC view: Buy, 651p, 25 Feb 2022