Speculation is growing that Rightmove could drop out of the prestigious FTSE-100 within the next few days as the stock exchange index undergoes a reassessment of entries.
The financial services publication Mortgage Strategy cites investment advisory service the Share Centre as saying Rightmove is in pole position to drop out of the FTSE-100 as a result of the portal’s recent share price dip and longer-term uncertainty over the housing market and the wider economy.
Such a move is not in itself a critical reflection of the portal or its future prospects; other currently-listed FTSE-100 companies named as facing possible removal from the index is Direct Line, Royal Mail and Marks & Spencer.
The FTSE-100 consists of the 100 largest companies by market capitalisation listed on the London Stock Exchange; the level of the overall FTSE-100 index is measured on the basis of the total market capitalisation of its entries, as well as the index value, so there is a vested interest in reviewing entries to ensure only the largest firms are included.
Companies dropping from the FTSE-100 then typically go into the FTSE-250 - this is not, contrary to popular perception, the top 250 companies - it is in fact the ‘next largest’ 250 companies after those in the FTSE-100.
Despite the possible change of status, Rightmove remains hugely successful: it floated on the London Stock Exchange on March 15 2006 and in recent years has reported an increase in both profits and revenue.
However, market analysts have expressed growing concern over the long-term future of portals such as Rightmove.
At the end of July we reported that international portal analyst Mike DelPrete was raising question marks over the long-term profitability of Rightmove under its current strategy; at the start of August, investment service Berenberg cut its rating on Rightmove shares to 'buy' from 'hold' and cut its price target for the share.
"We have for some time been of the view that a business model so reliant on price increases is ripe for disruption” Berenberg analysts said at the time.
"Clearly, Rightmove has built a position whereby it has strong pricing power and highly recurring revenues ... However, with traditional agents margins under pressure from a whole host of structural factors, macro uncertainties and increasing competitive pressures we believe the current share price and consensus estimates fail to appropriately reflect reality."