Rightmove: Did H1 Results, OpenRent Loss Cause 10% Fall in August?
Company Update (RMV LN) Shares are now at 20x 2023 Underlying earnings; we believe there can be 73% upside by end of 2027.
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Highlights
Revenues grew 7% in H1, driven by product upgrades & pricing.
But EBIT grew just 2%, and cost hikes may not be fully appreciated.
OpenRent contract was not significant financially or strategically.
The supposed threat from CoStar has not had an impact.
At 518.4p, we see a 73% total return (17.9% p.a.) by 2027 year-end.
Introduction
We review our Buy rating on Rightmove after the release of H1 results (July 26) and the termination of the OpenRent contract (disclosed August 6). Shares have fallen by 10.0% since the end of July and are at their lowest since May:
Rightmove Share Price (Last 1 Year)
Source: Google Finance (07-Aug-24).
Part of the recent decline is likely driven by wider sentiment, the result of market turbulence following a 12% one-day slump in the Japanese stock market (on August 4). Rightmove shares actually rose in the first few days after results.
Rightmove has been a mid-sized position in our “Select 15” model portfolio since May 2024, having first been added in July 2023. We first upgraded our rating on Rightmove to Buy in October 2021. It currently shows a ~2% loss in our model portfolio, but the share price has fallen by 22.7% since our initiation. We also hold Rightmove in real life.
We believe Rightmove shares have a potential upside of 70%+ by the end of 2027, driven by a ~8% EPS CAGR, an upwards re-rating and dividends. H1 results showed that the business is doing well despite the supposed threat from CoStar, and the OpenRent contract was immaterial financially and insignificant strategically. Its 20x P/E means the valuation would still be attractive if management were to fall short of their double-digit medium-term growth target.
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