Rightmove PLC (LSE:RMV), the UK’s largest online real estate company, could see its underlying earnings margin fall to 73% in 2023 as it looks to new sources to boost its revenues, according to analysts at Liberum.
In the business’ full-year results, it revealed plans to help broaden its income base through increasing investment in other points of revenue.
The investment is aimed to focus on increasing staff in the company, with around 50 workers understood to be brought in over the coming year, Liberum said.
The change in strategy comes as house values continue to fall, with last month seeing home prices dropping for the sixth month in a row in what is the longest consecutive period of falls since 2009.
Rightmove said last week that managed to remain buoyant in 2022, posting a 9% and 7% increase in revenues and underlying profits respectively.
However, the impacts of a weakening housing market is leading to increased investment beyond 2023, the analysts at Liberum said.
“Management anticipates the other revenue line to grow by £10m per annum from 2024 onwards due to these investments,” said the UK bank.
The online housing portal also warned investors that real estate agents using the site could fall in 2023.
“This is driven by natural attrition in the estate agent base (retirees and bankruptcies) combined with lower-than-normal agency formation as the market remains relatively cool in 2023,” Liberum explained.
However, the bank believes that new home developers using Rightmove could increase, but it would not be enough to completely offset the reduction in agents.
Liberum added that the “shares are not priced for perfection”, with the 557.8p at which they closed last week standing at a 17% discount to the broker's target price of 660p.