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Rightmove can’t “rest on its laurels” to attract agents - warning

Analysts have given their backing to Rightmove’s stock market prospects but there are warnings that it can’t “rest on its laurels” in the face of emerging competition from CoStar-owned OnTheMarket.

The portal’s latest annual report released last week shows profits of £258m off the back of a 10% rise in revenues.

While average estate agency revenue per advertiser (ARPA) was up 6% to £1,356, Rightmove ended the year with 15,839 agent customers – down 1%.


It comes amid the resurgence of OnTheMarket following its takeover by CoStar, which has promised a massive marketing budget.

Analysts questioned how much more Rightmove will be able to raise agent fees in the face of portal competition.

Charlie Huggins, manager of the quality shares portfolio at Wealth Club, said: “This is another decent set of results from Rightmove. Despite the significant challenges facing the housing market, it has again grown revenue and profit, underlining the resilience of its business model. 

“Rightmove’s revenues aren’t directly linked to the number of houses bought and sold, or even to house prices. Combined with its exceptionally dominant market position this has underpinned Rightmove's progress.”

However, Huggins warned the competitive environment is hotting up. 

He said: “CoStar's acquisition of OnTheMarket means Rightmove now faces a highly credible and deep-pocketed rival. While it seems very unlikely CoStar will topple Rightmove, it could make it more difficult for Rightmove to raise prices and force it to respond with higher marketing and advertising costs. Time will tell.

“One thing's for sure, Rightmove cannot afford to rest on its laurels. Innovation is becoming increasingly important and that comes at a cost. This means operating profit growth is expected to lag revenue growth in the year ahead." 

Mark Crouch, analyst at investment platform eToro, added: “Rightmove have posted an impressive set of earnings this morning, despite a less than accommodating economic climate. 
“While these earnings are a glowing reflection of Rightmove’s business model and dominance in the space, the more pressing challenge facing the company and their shareholders is the current state of the UK housing market, which continues to flounder, and the future direction of interest rates.”

Crouch said Rightmove boasts excellent margins but has still only seen a 20% increase in its share price in the last five years. 

He said: “Compare that to the five years prior to the 2018 stock split which saw the share price increase by over 130%. What these results do seem to indicate however, is the company is more than equipped to navigate any future economic headwinds, should they arise.”


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